A social welfare perspective of competing supply chains

Bin Shao, Chongqi Wu

Abstract

We employ the classic concept of deadweight loss in economics to quantify social welfare, which is an integral component of social sustainability from a supply chain perspective. Consider an industry consisting of two supply chains. Each channel produces and distributes a competing product. Each channel can be either decentralized or integrated. In this stylized model, we study social welfare issue. Specifically, we investigate how demand asymmetry, differentiation and degree of vertical integration affect social welfare. Key findings are: (1) Monopoly does not always hurt social welfare; (2) having equally matched competing channels may or may not be socially beneficial, depending on industry configurations.