Game Theoretic Modeling of Horizontal Supply Chain Coopetition among Growers

Abstract

Horizontal supply chains is the term used when suppliers competing at a particular level of the chain form a coalition to benefit from their cooperation rather than the usual competitive strategies used by them to become part of the supply chain. Such horizontal cooperation among competitors is studied by Wood, using qualitative research methodology, based on case studies done in New Zealand. The term "coopetition" is used in the literature to describe such a cooperative behavior among competitors. In this paper we examine the coopetition phenomenon from a game theoretic perspective and give a model that brings out the equilibria that will lead to optimal participation among the coalition partners. The model considers a set of growers who can choose to form a coopetitive alliance to market their production in some external regions, while competing within the internal regions. By means of a general analytical framework of competition, we show the strategies that could provide solutions, in a coopetitive perspective, for the growers. These solutions offer a win–win outcome for the growers, letting them share the pie fairly within a growth path of games. We determine the proportion of resources they'll use and how the gain will be shared.