Effects of risk attitudes and investment spillover on supplier encroachment

  • Huiru Chen
  • Yingchen YanEmail author
  • Nana Ma
  • Jie Liu


With the development of e-commerce, a growing number of suppliers have begun to initially establish their own direct channels, competing with their retail channels. However, while this encroachment endows the suppliers with an efficient method to control downstream competition and total production output directly, it may hurt the retailer due to the loss of monopoly in the retail market. This inconsistency presents a difficulty in reaching equilibrium. In this paper, we focus on the combined effects of the risk attitudes and upstream production investment of supply chain members on supplier encroachment and verify the existence of “win–win” results for both supplier and retailer. We find that, while the two parties cannot simultaneously benefit from supplier encroachment in the absence of upstream investment, they can obtain a Pareto improvement from it in the presence of upstream investment and spillover effect. Regarding risk attitudes, we find that both the supplier and the retailer can reach agreement on the supplier encroachment in the case of a moderate confidence level. In other words, the not too risk-loving and not too risk-averse supply chain members are more likely to obtain a Pareto improvement.


Encroachment Investments Spillover effects Confidence level Uncertainty environment 



This work is supported by the National Natural Science Foundation of China under Grant No. 71771165 and 61873108, the Key Project of Humanities and Social Sciences in Hubei Education Department under Grant No. 18D101, the High Level Training Project of Huanggang Normal University under Grant No. 201816803, and Yanta Scholars Foundation of Xi’an University of Finance and Economics.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Ethical approval

This article does not contain any studies with human or animal participants performed by any of the authors.

Informed consent

Informed consent is obtained from all individual participants included in the study.


  1. Arya A, Mittendorf B, Sappington DE (2007) The bright side of supplier encroachment. Mark Sci 26(5):651–659Google Scholar
  2. Chai J, Chen H, Huang Q, Yan W (2017) Should a manufacturer encroach on its retailer’s operations with quality differentiated products? In: Discrete dynamics in nature and societyGoogle Scholar
  3. Che YK, Hausch DB (1999) Cooperative investments and the value of contracting. Am Econ Rev 89(1):125–147Google Scholar
  4. Chen X (2014) Uncertain calculus and uncertain finance. UTLab, BeijingGoogle Scholar
  5. Chen H, Wang X, Liu Z, Zhao R (2017) Impact of risk levels on optimal selling to heterogeneous retailers under dual uncertainties. J Ambient Intell Humaniz Comput 8(5):727–745Google Scholar
  6. Chen H, Yan Y, Liu Z, Xing T (2018a) Effect of risk attitude on outsourcing leadership preferences with demand uncertainty. Soft Comput 22(16):5263–5278zbMATHGoogle Scholar
  7. Chen H, Yan Y, Ma N, Yang L (2018b). Coopetition strategy and pricing timing in an outsourcing supply chain with uncertain operation risks. IEEE Trans Fuzzy Syst.
  8. Chiang WK, Chhajed P, Hess JD (2003) Direct marketing, indirect pro fits: a strategic analysis of dual-channel supply-chain design. Manag Sci 49(1):1–20zbMATHGoogle Scholar
  9. Chung H, Lee E (2017) Asymmetric relationships with symmetric suppliers: strategic choice of supply chain price leadership in a competitive market. Eur J Oper Res 259(2):564–575MathSciNetzbMATHGoogle Scholar
  10. Fanti L (2016) Endogenous timing under price competition and unions. Int J Econ Theory 12(4):401–413MathSciNetzbMATHGoogle Scholar
  11. Ha AY, Tong S, Zhang H (2011) Sharing demand information in competing supply chains with production diseconomies. Manag Sci 57(3):566–581zbMATHGoogle Scholar
  12. Ha A, Long X, Nasiry J (2015) Quality in supply chain encroachment. Manuf Serv Oper Manag 18(2):280–298Google Scholar
  13. Hsiao L, Chen YJ (2014) Strategic motive for introducing internet channels in a supply chain. Prod Oper Manag 23(1):36–47Google Scholar
  14. Kapner S (2014) How the web drags on some retailers. Wall Street J. Scholar
  15. Ke H, Su T, Ni Y (2015) Uncertain random multilevel programming with application to production control problem. Soft Comput 19(6):1739–1746zbMATHGoogle Scholar
  16. Li Z, Gilbert SM, Lai G (2013) Supplier encroachment under asymmetric information. Manag Sci 60(2):449–462Google Scholar
  17. Li T, Xie J, Zhao X (2015a) Supplier encroachment in competitive supply chains. Int J Prod Econ 165:120–131Google Scholar
  18. Li Z, Gilbert SM, Lai G (2015b) Supplier encroachment as an enhancement or a hindrance to nonlinear pricing. Prod Oper Manag 24(1):89–109Google Scholar
  19. Li H, Cui N, Xu X (2017) Dual channel supply chain with manufacturer competition. J Syst Eng 32(4):535–546zbMATHGoogle Scholar
  20. Liu B (2007) Uncertainty theory, 2nd edn. Springer, BerlinzbMATHGoogle Scholar
  21. Liu B (2010) Uncertainty theory: a branch of mathematics for modeling human uncertainty. Springer, BerlinGoogle Scholar
  22. Liu Z, Zhao R, Liu X, Chen L (2017) Contract designing for a supply chain with uncertain information based on confidence level. Appl Soft Comput 56:617–631Google Scholar
  23. Shang W, Ha AY, Tong S (2015) Information sharing in a supply chain with a common retailer. Manag Sci 62(1):245–263Google Scholar
  24. Tedeschi B (2000) E-commerce report; Traditional manufacturers are grappling with the pros and cons of direct sales on the Internet. New York Times, January 3Google Scholar
  25. Tsay AA, Agrawal N (2004) Channel conflict and coordination in the E-commerce age. Prod Oper Manag 13(1):93–110Google Scholar
  26. Wang Y, Niu B, Guo P (2013) On the advantage of quantity leadership when outsourcing production to a competitive contract manufacturer. Prod Oper Manag 22(1):104–119Google Scholar
  27. Wu X, Zhao R, Tang W (2014) Uncertain agency models with multidimensional incomplete information based on confidence level. Fuzzy Optim Decis Mak 13(2):231–258MathSciNetzbMATHGoogle Scholar
  28. Xiao T, Qi X (2008) Price competition, cost and demand disruptions and coordination of a supply chain with one manufacturer and two competing retailers. Omega 36(5):741–753Google Scholar
  29. Xie J, Zhang W, Liang L, Xia Y, Yin J, Yang G (2018) The revenue and cost sharing contract of pricing and servicing policies in a dual-channel closed-loop supply chain. J Clean Prod 191:361–383Google Scholar
  30. Yao D-Q, Yue X, Mukhopadhyay SK, Wang Z (2009) Strategic inventory deployment for retail and e-tail stores. Omega 37(3):646–658Google Scholar
  31. Yan Y, Zhao R, Lan Y (2017) Asymmetric retailers with different moving sequences: group buying versus individual purchasing. Eur J Oper Res 261(3):903–917zbMATHGoogle Scholar
  32. Yan Y, Zhao R, Liu Z (2018a) Strategic introduction of the marketplace channel under spillovers from online to offline sales. Eur J Oper Res 267(1):65–77MathSciNetzbMATHGoogle Scholar
  33. Yan Y, Zhao R, Chen H (2018b) Prisoner’s dilemma on competing retailers’ investment in green supply chain management. J Clean Prod 184:65–81Google Scholar
  34. Yan Y, Zhao R, Xing T (2018c) Strategic introduction of the marketplace channel under dual upstream disadvantages in sales efficiency and demand information. Eur J Oper Res.
  35. Yang X, Gao J (2016) Linear-quadratic uncertain differential game with application to resource extraction problem. IEEE Trans Fuzzy Syst 24(4):819–826MathSciNetGoogle Scholar
  36. Yang K, Zhao R, Lan Y (2014) The impact of risk attitude in new product development under dual information asymmetry. Comput Ind Eng 76:122–137Google Scholar
  37. Yang H, Luo J, Zhang Q (2017) Supplier encroachment under nonlinear pricing with imperfect substitutes: bargaining power versus revenue-sharing. Eur J Oper Res 267:1089–1101MathSciNetzbMATHGoogle Scholar
  38. Yang H, Luo J, Zhang Q (2018) Supplier encroachment under nonlinear pricing with imperfect substitutes: bargaining power versus revenue-sharing. Eur J Oper Res 267(3):1089–1101MathSciNetzbMATHGoogle Scholar
  39. Yoon D-H (2016) Supplier encroachment and investment spillovers. Prod Oper Manag 25(11):1839–1854Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.College of Mathematics and StatisticsHuanggang Normal UniversityHubeiChina
  2. 2.College of Management and EconomicsTianjin UniversityTianjinChina
  3. 3.School of StatisticsXi’an University of Finance and EconomicsShaanxiChina

Personalised recommendations