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Horizontal Carrier Coordination through Cooperative Governance Structures

Agrell, Per J.; Lundin, Johan LU and Norrman, Andreas LU (2016) In International Journal of Production Economics
Abstract
This paper examines how governance structures found in the trucking industry impact the coordination between a forwarder and its carriers, including three cases: no forwarder coordination (direct contracting with shippers), investor-owned coordination (price-only contract), and carrier-cooperative coordination (revenue-sharing contract). The carriers are engaged in a Cournot competition, where they decide upon service provision and truck investment. Economic theory predicts that integration of firms under oligopolistic competition always leads to a more efficient supply chain in the sense that prices decrease and quantities increase, which reduces total profits. This suggests that the benefit of avoiding double marginalization does not... (More)
This paper examines how governance structures found in the trucking industry impact the coordination between a forwarder and its carriers, including three cases: no forwarder coordination (direct contracting with shippers), investor-owned coordination (price-only contract), and carrier-cooperative coordination (revenue-sharing contract). The carriers are engaged in a Cournot competition, where they decide upon service provision and truck investment. Economic theory predicts that integration of firms under oligopolistic competition always leads to a more efficient supply chain in the sense that prices decrease and quantities increase, which reduces total profits. This suggests that the benefit of avoiding double marginalization does not outweigh the benefit of upstream competition in the successive oligopoly case, whereas both integrated and independent firms coexist, the integrated chains do perform better. In this paper we examine the interaction between governance structures, a key decision when managing supply chains, including that found in the trucking industry, and shippers willingness to procure trucking services instead of producing them using a private fleet. We find that cooperative governance can contribute to improved service provision, reduced service price, improved consumer surplus, and improved profit for the carriers in equilibrium. We use parameter values based on the Swedish trucking industry and a larger grocery retailer acting as shipper to numerically illustrate the impact of different governance structures. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
epub
subject
in
International Journal of Production Economics
pages
13 pages
publisher
Elsevier
external identifiers
  • scopus:85008260035
ISSN
0925-5273
DOI
10.1016/j.ijpe.2016.10.025
language
English
LU publication?
yes
id
bce542f7-0d14-485c-90a2-42840edda92c
date added to LUP
2016-11-15 21:47:20
date last changed
2017-05-29 14:52:35
@article{bce542f7-0d14-485c-90a2-42840edda92c,
  abstract     = {This paper examines how governance structures found in the trucking industry impact the coordination between a forwarder and its carriers, including three cases: no forwarder coordination (direct contracting with shippers), investor-owned coordination (price-only contract), and carrier-cooperative coordination (revenue-sharing contract). The carriers are engaged in a Cournot competition, where they decide upon service provision and truck investment. Economic theory predicts that integration of firms under oligopolistic competition always leads to a more efficient supply chain in the sense that prices decrease and quantities increase, which reduces total profits. This suggests that the benefit of avoiding double marginalization does not outweigh the benefit of upstream competition in the successive oligopoly case, whereas both integrated and independent firms coexist, the integrated chains do perform better. In this paper we examine the interaction between governance structures, a key decision when managing supply chains, including that found in the trucking industry, and shippers willingness to procure trucking services instead of producing them using a private fleet. We find that cooperative governance can contribute to improved service provision, reduced service price, improved consumer surplus, and improved profit for the carriers in equilibrium. We use parameter values based on the Swedish trucking industry and a larger grocery retailer acting as shipper to numerically illustrate the impact of different governance structures.},
  author       = {Agrell, Per J. and Lundin, Johan and Norrman, Andreas},
  issn         = {0925-5273},
  language     = {eng},
  month        = {11},
  pages        = {13},
  publisher    = {Elsevier},
  series       = {International Journal of Production Economics},
  title        = {Horizontal Carrier Coordination through Cooperative Governance Structures},
  url          = {http://dx.doi.org/10.1016/j.ijpe.2016.10.025},
  year         = {2016},
}