Supplier-buyer models for the bargaining process over a long-term replenishment contract

This paper presents supplier-buyer models to describe the bargaining process between a supplier and a buyer over a long-term replenishment contract. Two different models are developed: one for the situation where the supplier has a superior bargaining power over the buyer, and the other for the reverse situation. For each model, a method is derived to find the best strategy of each agent via analysis based on a game-theoretic approach. The solution found by the method is verified to be the Nash Equilibrium of each model. The system costs of the models are compared to determine the economic implications of the results.