Game theoretical analysis of leadership structure for supply chains involving risky supplier

Supply chain risk management is one of significant issues in the design and operations of supply chains. It is well-known that leader-follower relationship influences the decision making of decentralized supply chains. In this paper, we address a game theoretical analysis of the leadership structure in the decentralized supply chain with risky supplier under demand uncertainty. The risky supplier has a risk of unavailability of the supply product for the ordered product according to the probability of supplier availability. The equilibrium solution is analytically derived for a single supplier, a single risky supplier and a single retailer. The influence of the probability of risky supplier availability to the optimal leadership structure is investigated. Numerical examples are provided to show the validity of the proposed game theoretical analysis.