To share or withhold? Contract negotiation in buyer–supplier–supplier triads

Abstract

Purpose

This paper seeks to fill the literature gap that lacks of exploring negotiation strategy with competing partners under asymmetric production-cost information. The purpose of this paper is to examine firms’ optimal contract negotiation strategies in buyer–supplier–supplier triads where there are concurrent negotiations between the retailer and two competing manufacturers.

Design/methodology/approach

The authors consider a two-echelon supply chain, in which the retailer has the option of segmented or unified negotiation policy, whereas the two competing manufacturers can withhold or share production cost information in the negotiation. Based on game theory, the authors derive the manufacturers’ optimal wholesale prices and the retailer’s optimal retail prices with eight possible scenarios. Optimal strategic choices and operational decisions are then explored through the comparative analysis of equilibriums of eight possible scenarios.

Findings

The authors find that the retailer will adopt different negotiation strategies depending on manufacturers’ decisions on sharing or withholding their production-cost information. When both manufacturers share their production-cost information, the retailer will adopt a unified negotiation policy. The high-efficiency manufacturer should adopt the same information-sharing strategy as the low-efficiency manufacturer in order to gain more profit.

Originality/value

The modelling helps to bring further clarity in supply chain contract negotiation by offering a conceptual framework to enhance our understanding of the effects of information-sharing strategy and negotiation policy in the negotiation process form the perspectives of all engaging parties. Managerial insights derived from the research will enable retailers and manufacturers to make informed and better strategic and operational decisions to improve market competitiveness.

Citation

Chen, X., Wang, X., Zhu, X. and Amankwah-Amoah, J. (2020), "To share or withhold? Contract negotiation in buyer–supplier–supplier triads", Industrial Management & Data Systems, Vol. 120 No. 1, pp. 98-127. https://doi.org/10.1108/IMDS-07-2019-0374