A Sadri Esfahani - Department of Industrial Engineering, Faculty of Engineering, Yazd University, Yazd, Iran
M.B Fakhrzad - Department of Industrial Engineering, Faculty of Engineering, Yazd University, Yazd, Iran

In this paper, we study an outsourced supply chain consisting of one buyer and two suppliers in whichthe buyer outsources manufacturing of a physical product to two competing suppliers. The supplierscompete for the buyers' demands share, and the buyer allocates the demands to the competing suppliersbased on three-dimensional allocation functions. We consider two certain types of allocation functionswhich depend on price, service level and product quality level. They include the exponential allocationfunction and the Cobb-Douglas allocation function. A three-stage game-theoretic framework ispresented to derive the equilibrium values. Since the problem lacks a closed-form solution, numericalstudies are conducted over a wide range of some key parameters.

Supply ChainCompetitionOutsourcing