Incentive contract in relief supply chains: The case of multiplayer competition and cooperation

Abstract

Cooperations between relief organisations and private-sector enterprises are common and crucial in responding to disasters, and incentive strategies may help encourage the enterprises to provide faster delivery of relief supplies to mitigate more human suffering. However, there have been few studies of relief organisations incentivizing logistics enterprises to improve delivery times, especially with the consideration of competition and cooperation among multiple enterprises. In this paper, we propose three incentive contracts between a relief organisation and multiple logistics enterprises by answering two research questions: (1) Will suitable delivery time incentive strategies benefit both the relief organisation and the logistics enterprises? and (2) Can the relief organisation benefit more from encouraging competition among logistics enterprises? Hence, we consider and compare four different situations (no incentives, common incentives, incentives with competition, incentives with competition and cooperation) between the relief organisation and the logistics enterprises using Stackelberg game. We conduct a case study in China to show the feasibility and appropriateness of our contracts. The result shows that the proposed incentive contract can benefit relief organisation and all logistics enterprises. The relief organisation can benefit more from encouraging competition among the logistics enterprises, but the enterprises can easily avoid the loss through cooperation.