Foundations and Trends® in Technology, Information and Operations Management > Vol 5 > Issue 3–4

The Economic Foundations of Supply Chain Contracting

Harish Krishnan, Sauder School of Business, University of British Columbia, Canada, harish.krishnan@sauder.ubc.ca Ralph A. Winter, Sauder School of Business, University of British Columbia, Canada, ralph.winter@sauder.ubc.ca
 
Suggested Citation
Harish Krishnan and Ralph A. Winter (2012), "The Economic Foundations of Supply Chain Contracting", Foundations and Trends® in Technology, Information and Operations Management: Vol. 5: No. 3–4, pp 147-309. http://dx.doi.org/10.1561/0200000029

Published: 17 Sep 2012
© 2012 H. Krishnan and R. A. Winter
 
Subjects
Contracting in Supply Chains,  Supply Chain Management
 
Keywords
Supply chain managementCompetitive marketsMarket powerSupply chain contracting
 

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In this article:
1 Introduction
2 Background: Supply Chain Contracts in Practice
3 Remarks on Methodology
4 The Benchmark: Perfectly Competitive Markets
5 Upstream Market Power
6 Two-stage Market Power: The 1–1 Market Structure
7 Downstream Duopoly: The 1–2 Market Structure
8 Two Upstream Firms, Selling Through One Downstream Firm: The 2–1 Market Structure
9 Competing Supply Chains
10 Dynamics
11 Asymmetric Information
12 Supply Chain Management, Relational Contracting and the Theory of the Firm
13 Conclusion and Additional Issues in Supply Chain Management
References

Abstract

Why do supply chain contracts take the forms that they do? Which contracts should firms adopt to coordinate incentives along a supply chain? This monograph synthesizes the theory of contracts along supply chains. It integrates developments from two largely separate literatures, the management science literature on supply chain coordination and the economic literature on vertical control.

DOI:10.1561/0200000029
ISBN: 978-1-60198-578-1
176 pp. $99.00
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ISBN: 978-1-60198-579-8
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Table of contents:
Introduction
Background: Supply Chain Contracts in Practice
Remarks on Methodology
The Benchmark: Perfectly Competitive Markets
Upstream Market Power
Two-stage Market Power: the 1-1 Marketstructure
Downstream Duopoly: The 1-2 Market Structure
Two Upstream Firms, selling through one Downstream Firm: The 2-1 market structure
Competing Supply Chains
Dynamics
Asymmetric Information
Supply Chain Management, Relational Contracting and the Theory of the Firm
Conclusion and Additional Issues in Supply Chain Management

The Economic Foundations of Supply Chain Contracting

The Economic Foundations of Supply Chains Contracts is premised on the theme that as supply chain management moves from a focus on optimization problems to issues of coordination, a closer link to the underlying economic foundations is essential. This monograph offers a synthesis of the economic foundations of supply chain contracts. Accordingly, the coverage is selective and incorporates elements of economic theory that we believe will be of most value to our intended readers, the students and scholars of management science and operations management. After and introduction, Section 2 provides an overview of evidence on the nature and frequency of specific supply chain contracts. Section 3 offers some brief remarks on methodology concerning the application of economic theory to supply chain contracting. Section 4 reviews the basic setting: perfect markets. The simplest departure from perfect markets is the introduction of market power. This is examined in Section 5 via the assumption of a single monopolist upstream, facing a competitive downstream market. Section 6 considers contracts in a standard framework: one firm operates at each of two levels of a supply chain. Section 7 adds imperfect competition downstream. Section 8 considers contracts in a setting with a single downstream firm and multiple upstream firms, including the case of a single incumbent firm facing potential entry. Section 9 reviews the role of contracts in competing supply chains. Sections 10 and 11 review the dynamics of supply chain contracting and an explicit asymmetric information approach to contracting. Section 12 reviews the key contributions to the fundamental issues of vertical integration, investment in specific assets, and long run or relational contracting. Section 13 concludes the monograph with an overview of additional issues in the economics of supply chain contracting

 
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