Co-Opetition And Investment For Supply-Chain

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Executive Summary

This paper considers the problem of disruption risk management in global supply chains. The author considers a supply chain with two participants, who face interdependent losses resulting from supply chain disruptions such as terrorist strikes and natural hazards. The Harsanyi-Selten-Nash bargaining framework is used to model the supply chain participants' choice of risk mitigation investments. The bargaining approach allows a framing of both joint financing of mitigation activities before the fact and loss-sharing net of insurance payouts after the fact. The disagreement outcome in the bargaining game is assumed to be the result of the corresponding non-cooperative game.

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