Consumer-to-manufacturer: supply chain and hybrid contracts

Purpose This study investigates how the consumer-to-manufacturer (C2M) affects strategic decisions in a supply chain consisting of two manufacturers and one platform involving hybrid contracts. Design/methodology/approach This study develops a game-theoretic framework analyzing pricing decisions between two upstream manufacturers and a common downstream platform. Two manufacturers employ distinct distribution contracts: one operates through a reselling contract while the other utilizes an agency contract. Through a multi-stage sequential game, this study examines four cases based on two manufacturers’ C2M adoption choices: no manufacturer adopts C2M (case NN), only one manufacturer uses C2M (case CN or case NC) or both manufacturers use C2M (case CC). Equilibrium solutions are derived by backward induction. Findings First, C2M implementation generates positive market effect that enhance the profits of the platform and manufacturers, with achieving maximum positive impact under case CC. However, the cost effect affects only the manufacturers that use C2M. Second, regardless of a manufacturer’s C2M decision, the rival manufacturer’s adoption of C2M increases the first manufacturer’s profits. Third, when C2M costs are below the threshold, case CC achieves an equilibrium for the platform and the manufacturers. Case CN cannot achieve equilibrium, regardless of the C2M cost level. Fourth, consumer surplus and social welfare are optimal in case CC. Originality/value This study makes dual contributions to supply chain management. First, it investigates how C2M adoption influences decisions among supply chain participants from the perspective of interactions between information sharing and C2M. Second, this study illustrates the impact of contract differences on manufacturers’ C2M decisions.