The risk of supply disruptions because of suppliers' financial problems plays a prominent role in manufacturers' risk portfolios. Even large suppliers (e.g., Delphi) could file for bankruptcy, and manufacturers' actions, such as financial subsidies to suppliers, profoundly affect suppliers'...

We study the effects of disruption risk in a supply chain where one retailer deals with competing risky suppliers who may default during their production lead times. The suppliers, who compete for business with the retailer by setting wholesale prices, are leaders in a Stackelberg game with the...