This paper studies the optimal component procurement strategies of two competing OEMs selling substitutable products. The OEMs outsource their production to a common contract manufacturer, who in turn needs an input from a component supplier. Each OEM may either directly procure the input from...

This paper explores the merits of hedging stochastic input costs (i.e., reducing the risk of adverse changes in costs) in a decentralized, risk neutral supply chain. Specifically, we consider a generalized version of the well-known ‘selling-to-the-newsvendor' model in which both the up-stream...