Decisions of supply chain considering chain-to-chain competition and service negative spillover effect

Abstract

In today's complex market competition environment, a high quality and high level of service plays a critical role in obtaining and maintaining long-term sustainable competitive advantage for enterprises and supply chains. Considering the service negative spillover effect, this paper investigates the horizontal Stackelberg competition and optimal service decision in two competing manufacturer-led supply chains. Four competitive structure models are constructed and the corresponding equilibrium solutions are obtained. By comparing the equilibrium results of four different structures, it is found that the service negative spillover effect and competition between supply chains have negative incentive effect on service providers and their supply chains. However, the chain-to-chain competition will benefit the supply chain that does not provide services from free-riding effect, which will be intensified with the intensification of competition. In addition, from the perspective of supply chain network and externality, we find that when the structure of one supply chain remains fixed and the other changes from centralized to decentralized, there will be a "double marginalization" effect. At the same time, the structural change from centralized to decentralized has certain "altruism", that is, positive network externality, so as to improve the rival's performance significantly.