Quality Improvement Policies in a Supply Chain with Stackelberg Games

Abstract

We first analyze quality and price decisions in a supply chain with two Stackelberg games: Manufacturer’s Stackelberg (MS) and Supplier’s Stackelberg (SS). Then, we investigate how equilibrium solutions are influenced by proposed quality improvement policies: coordination and manufacturer’s involvement. Also, we derive the conditions under which the policies can be implemented in both MS and SS strategies. Numerical experiments illustrate the problems and several related issues are discussed. The results suggest that proposed quality improvement policies can realize Pareto improvement for the supply chain performance.