Yanhong Sun

Operational causes of bankruptcy propagation in supply chain

With the increasing interdependence among supply chain members, bankruptcy of a supply chain member may be caused by operational decisions of other members. To investigate how bankruptcy occurs and propagates in supply chain networks, we build a multi-agent simulation model for a two-stage supply chain that consists of multiple upstream manufacturers and multiple downstream retailers. Based on the developed simulation model, we study impacts of various operational parameters and decisions, such as horizontal competition among retailers, order allocation strategies of retailers, wholesale price of manufacturers, characteristics of market demand and number of retailers, on bankruptcy propagation. Since many operational decisions of a firm are made under financial constraints, we also investigate the linkage between firms operational risks and financial decisions (e.g., the maximal risk of cash flow that a member is willing to take, and the up-front payment proportion of retailers in a two-period payment policy). Experimental results reveal that operational interactions between supply chain members and operational decisions made by supply chain members are important causes of bankruptcy propagation, but impacts of these operational parameters and decisions depend on financial decisions. These observations indicate that supply chain members can moderately hedge their operational risk through financial decisions.

Reducing the Probability of Bankruptcy Through Supply Chain Coordination

With the increasing interdependence among supply chain members, bankruptcy of a supply chain member may cause other member firms to get into financial difficulties. This paper investigates the methods for reducing the probability of bankruptcy through supply chain coordination. Based on the developed multiagent simulation model for a simple three-echelon supply chain, the effects of coordination mechanisms, such as information sharing (INS) and vendor-managed inventory (VMI), on reducing the occurrence of bankruptcy at each stage of the supply chain are examined. Simulation results show that such coordination mechanisms are effective in reducing the risk of bankruptcy. However, the key roles of these coordination mechanisms, e.g., the manufacturer in VMI and the retailer in INS, may be reluctant to cooperate since they gain less benefit or even suffer a loss from the coordination. Additional cooperation incentive measures, i.e., permissible delay in payment for INS and inventory subsidy for VMI, are thus proposed for the implementation of these coordination mechanisms, and simulation results confirm their validity.

Mitigating bankruptcy propagation through contractual incentive schemes

With the increasing interdependence among supply chain members on material, information and capital, interactions and decisions characterized by operational parameters are important causes of bankruptcy propagation in supply chain. This paper investigates the methods for mitigating bankruptcy propagation through supply chain coordination. Based on a two-stage supply chain network that consists of multiple upstream manufacturers and multiple downstream retailers, the effectiveness of some typical contractual incentive schemes, including revenue sharing, price discount and quantity flexibility contracts, in mitigating bankruptcy propagation among supply chain members is examined. Through agent-based simulation experiments, it has been revealed that: 1) the three typical supply chain contracts with properly designed contract parameters are effective in mitigating bankruptcy propagation, but their effectiveness depends on operational parameters of the supply chain; 2) horizontal competition among retailers is an important factor in determining the effectiveness of these contracts; 3) revenue sharing contract turns out to be more effective in mitigating bankruptcy propagation than the other two contracts. By comparing the optimal contract parameters with and without considering bankruptcy risks, it has also been found that, a set of contract parameters that can maximize the profit of the supply chain may increase the occurrence of bankruptcy in supply chain, leading to the phenomenon of a risk-profit tradeoff.

Cooperation strategies for e-commerce platforms with seller classification

Purpose The purpose of this paper is to study the cooperation and pricing strategies for e-commerce platforms when considering seller classification. Design/methodology/approach E-commerce platforms serve to facilitate trade and generate revenue from the participants. By classifying the sellers in the market into two types (the individual sellers vs the professional sellers), the authors examine how the interaction between the two types of sellers affects the platform’s cooperation and pricing decisions. Specifically, the authors compare two cooperation strategies for the platform: cooperating only with the professional sellers (strategy I); and cooperating with both the two types of sellers (strategy II). Findings When the platform attractiveness for the professional sellers is high enough, strategy II is absolutely beneficial than strategy I; whereas when the platform attractiveness for the professional sellers is low and the performance requirement of the individual sellers is relatively high, strategy I will be more beneficial. Practical implications For a platform choosing strategy II, it should make effort to differentiate between the different types of sellers by the product or service quality. Originality/value The paper is among the first to study the cooperation and pricing strategies for the e-commerce platform with seller classification.

Advance selling strategies for oligopolists by considering product diffusion effect

Purpose – The purpose of this paper is to study the advance selling strategies for oligopolists when considering the product diffusion effect. Design/methodology/approach – The authors consider a market that composes of two competitive sellers who are different in their reputation. The two firms sell the same product in the market over two periods (i.e. the advance selling season and the regular selling season). Due to the effect of product diffusion, the demand of each firm in the regular selling season is dependent on the two firms’ advance demands. Findings – For the firm with lower reputation, it is beneficial to decrease the advance selling price with the diffusion effect caused by its advance demand. For the firm with higher reputation, it is also beneficial to decrease the advance selling price with the diffusion effect caused by its advance demand if the consumers’ enthusiasm for the product in regular selling season is high enough; otherwise it should not decrease his advance selling price since ...

Optimal Pricing Decisions for the Online Video Platform Under Customer Choice

With the development of the video-on-demand (VOD) technology, the audiences can decide to skip the advertisements by paying the video platform. This paper examines the optimal pricing decisions for an online video platform by considering the customer’s choice behavior. Based on a two-sided market that is composed of a monopolistic video platform, advertisers and audiences, we show that the platform’s optimal price charging from the advertisers is decreasing in the degree of audiences’ disutility for advertisements, while the optimal price charging from the audiences is convex in the degree of audiences’ disutility for advertisements. More interestingly, we find that the equilibrium number of advertisers on the platform and the video platform’s profit are both convex in the degree of audiences’ disutility for advertisements, which are counter-intuitive. We also extend our model to the case with two duopolistic platforms and find that the optimal number of advertisers on the platform is concave in the degre...

Online search-based advertising strategy for e-Business platform with the consideration of consumer search cost

Purpose Consumers are increasingly using search-based advertising in e-Business platforms to seek their desirable products. Platforms will choose a centralized advertising mechanism (CAM) or decentralized advertising mechanism (DAM) to offer a search advertising service to lower consumer search cost, as represented by using search time length. It is important for the platform to decide how to choose advertising mechanisms, and how to determine the optimal advertising price and search time length. To address these issues, this study aims to develop a theoretical approach under each mechanism to examine the platform’s optimal search-based advertising strategy by considering search cost. Design/methodology/approach In this study, two models are developed to examine the optimal search-based advertising strategy by considering consumer search cost (i.e. search time length). By comparing the platform’s profits under two models, the optimal advertising strategy, search time length and price are explored. Findings It is found that when the seller’s reserve benefit is sufficiently large, the platform benefits from choosing the DAM; otherwise, the CAM is a better choice. The advertising service is usually offered with a shorter search time length accompanied by a higher charge, and a longer search time length accompanied by a lower charge. Specifically, when the seller’s reserve benefit is substantially high, a DAM that benefits both the platform and seller is a better choice. This can explain why many platforms offer advertising services with a DAM. Originality/value This paper is the first theoretical study on addressing the search-based advertising strategy, especially the choice of advertising mechanisms, in the online advertising context. It is also the first piece of analytical research that considers the effect of consumer search cost on product demand, and then examines the optimal advertising price and search cost (i.e. search time length) for online platforms.

Service outsourcing under co-opetition and information asymmetry

Co-opetition refers to the phenomenon that firms simultaneously cooperate and compete in order to maximize their profits. This paper studies the contracting for an outsourcing supply chain (a user company vs. a service provider) in the presence of co-opetition and information asymmetry. The user company outsources part of his service capacity at a discount price to the service provider for sale. The service provider charges a commission for doing outsourcing work and competes with the user company for the service capacity to satisfy their respective demands. We solve for the service provider’s optimal commission decision and the user company’s optimal outsourcing decisions (outsourcing volume and price discount) when the user company has private information about his service capacity. Specifically, we highlight the following observations. For the service provider, a menu of two-part tariffs that consist of a fixed commission and a per-volume commission can reveal the true type of the user company’s capacity; the user company’s optimal outsourcing proportion is quasi-convex and the optimal price discount is non-decreasing in his capacity volume, which is counterintuitive.