Profitability vs. Stability: The Choice of Trading Strategies in a Capacity Sharing Supply Chain

Abstract

Supported by a third-party capacity sharing platform, manufacturers can share capacities with others to match the rapidly changing demand. Both the capacity requestor and the capacity provider can choose to seek or wait for matches, forming different trading strategies (capacity- and demand-driven strategies). Based on the game and chaos theories, this paper analyzes the preference of the capacity provider, the capacity requestor, and the capacity platform operator on different trading strategies from the aspects of profitability and stability. It finds that the platform operator values stability much more than profitability, although the latter may reach higher optimal expected profits. The preference of each supply chain member is influenced by the production cost, potential market size, and the limited capacity of the capacity requestor. A stable system can result in higher long-run profits than a profitable system. We further propose the all-win situation for the capacity provider, capacity requestor, and platform operator.