Chain-to-Chain Competition Under Demand Uncertainty

In this paper,we aim to study the structure choice of supply chains under competitive environment with uncertain demand.We consider two competing supply chains,each of which chooses to either vertically integrate or decentralize with coordinating contracts.We first analyze firms’strategic behavior under given supply chain structures:two integrated chains(II),two decentralized chains(DD),and a mixed structure with one decentralized chain and one integrated chain.We then compare different supply chain structures and examine the equilibrium structure choice.We find that the equilibrium structure depends on the product characteristics.For substitutable products,DD is the equilibrium supply chain structure choice,whereas for complementary products,II is the equilibrium structure.Furthermore,a high demand uncertainty strengthens these equilibrium choices.