Strategic Asymmetry under Dual Sourcing -An Analysis of Capacity Investment Behavior
Date Issued
2011
Date
2011
Author(s)
Yu, Hung-Hsuan
Abstract
In modern industrial environment, many companies are gradually shaping their supply chains to either vertical integration, which they can get higher degree of internal control, or specialization. In the later operating model, there exists a product firm specializing in product design and marketing who does not have enough capacity to fulfill market demand.
In order to meet market demand and obtain better capacity supply, product firms usually outsource their orders to manufacturing companies and construct a demand rationing policy while inviting a new supplier into the supply chain. So the capability of those manufacturers determines how many orders they can take from the product firm.
For manufacturers, orders from the product firm are their only source of profit, it is not likely for the incumbent to do nothing when facing a potential entrant to snatch its order. Beside improving service quality by expanding capacity to meet the product firm''s requirements, incumbent can also deliver a strategic commitment to the entrant.
The structure of Three-way interaction under rationing policy creates a strategic asymmetry capacity investment behavior that is different from traditional Cournot and Bertrand competition.
Subjects
demand rationing
dual sourcing
capacity investment
strategic asymmetry
strategic commitment
Type
thesis
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