Profit seeking vs. survival seeking: An analytical study of supplier's behavior and buyer's subsidy strategy

Mike Mingcheng Wei, Tao Yao, Bin Jiang, Scott T. Young

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

Supplier default is common in emerging markets. Suppliers under the threat of default have different objectives from profit-seeking companies. This paper analytically tests how profit-seeking or survival-seeking behavior, single-period or two-period consideration, and buyer's subsidy influence the supplier's and buyer's final utilities. The results show that under single-period consideration, the supplier's survival-seeking strategy in fact drives more start-ups or small suppliers out of business when the competition becomes severe; under two-period consideration, no matter which strategy (profit-seeking or survival-seeking) the supplier selects, the second-period price and profit are always higher than those of the first period. Furthermore, we find that providing subsidy is an effective way for buyer to keep suppliers' competition at a certain level on the behalf of buyer's interest. By numerically estimating the benefits associated with the cost of subsidy, we provide a basis for understanding the cost-benefit analysis of buyer's subsidy strategy.

Original languageEnglish (US)
Pages (from-to)269-282
Number of pages14
JournalProduction and Operations Management
Volume22
Issue number2
DOIs
StatePublished - Mar 1 2013

Fingerprint

Profitability
Cost benefit analysis
Industry
Suppliers
Buyers
Subsidies
Profit
Costs

All Science Journal Classification (ASJC) codes

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

Cite this

Wei, Mike Mingcheng ; Yao, Tao ; Jiang, Bin ; Young, Scott T. / Profit seeking vs. survival seeking : An analytical study of supplier's behavior and buyer's subsidy strategy. In: Production and Operations Management. 2013 ; Vol. 22, No. 2. pp. 269-282.
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Profit seeking vs. survival seeking : An analytical study of supplier's behavior and buyer's subsidy strategy. / Wei, Mike Mingcheng; Yao, Tao; Jiang, Bin; Young, Scott T.

In: Production and Operations Management, Vol. 22, No. 2, 01.03.2013, p. 269-282.

Research output: Contribution to journalArticle

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