Partial Centralization in a Durable-Good Supply Chain

Thursday, April 6, 2023 11:00to12:00

Dynamic Games and Applications Seminar

Speaker: Victor Shi – Lazaridis School of Business and Economics, Wilfrid Laurier University, Canada

Victor Shi

Most supply chain research assumes complete centralization or complete decentralization but omits the commonly adopted structure of partial centralization. With partial centralization, a firm owns a portion, but not all, of its partner. In this paper, we analyze partial centralization in a supply chain where a durable-good manufacturer owns part of its downstream retailer. We start with a two-period model and derive analytical equilibrium outcomes of the supply chain. Our analysis reveals that first, partial centralization can become the equilibrium supply chain structure. Second, the manufacturer's equilibrium ownership level in the retailer decreases in product durability and decision horizon length.

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