Arbeitspapier

Supply chain dynamics with assortative matching

This paper studies the evolutionarily stable strategies of one-manufacturer and one-retailer supply chains. Each manufacturer and retailer chooses between two pure strategies of management: shareholder-oriented or stakeholder-oriented. Based on its management strategy, the firm decides its wholesale or retail price. In this paper, we consider supply chains formed by two matching processes: random matching and assortative matching. Our results indicate that random matching does not support interior Nash equilibria; the evolutionarily stable strategy is for both manufacturer and retailer to choose shareholder strategy. We extend Bergstrom (2003) to a two-population game, and compare the dynamics of supply chains under random matching and assortative matching. Interior Nash equilibrium is observed with assortative matching. However, this interior equilibrium is unstable. The four unique strategy profiles obtained by various combinations of the two strategy choices may be evolutionarily stable for certain values of the indices of assortativity.

Language
Englisch

Bibliographic citation
Series: Working Paper ; No. 736

Classification
Wirtschaft
Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
Business Objectives of the Firm
Firm Behavior: Theory
Subject
Nash equilibrium
assortative matching
evolutionary stable strategy
replicator equation

Event
Geistige Schöpfung
(who)
Chai, Caichun
Francis, Eilin
Xiao, Tiaojun
Event
Veröffentlichung
(who)
University of California, Economics Department
(where)
Santa Cruz, CA
(when)
2016

Handle
Last update
20.09.2024, 8:21 AM CEST

Data provider

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Object type

  • Arbeitspapier

Associated

  • Chai, Caichun
  • Francis, Eilin
  • Xiao, Tiaojun
  • University of California, Economics Department

Time of origin

  • 2016

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