Interconnected gears and chains symbolizing supply chain cooperation.

Supply Chain Secrets: Can Cooperation Trump Competition?

Rhea Morgan in Business & Economy August 2025 • 4 min read.

"Uncover the surprising ways businesses are teaming up to boost profits, even when they're rivals."

In today's fast-paced business world, it's easy to think of companies as rivals battling for every last customer. But what if working with your competitors could actually make you both stronger? This idea is at the heart of supply chain cooperation, where businesses that are part of the same production process team up to improve things for everyone.

Imagine a simple setup: one company provides the raw materials, and two others turn those materials into finished products. These manufacturers then sell the products to customers. Sounds like a straightforward competition, right? But in this kind of system, companies can face tricky decisions about pricing, production, and how to attract customers. Should they undercut their rivals? Or is there a way they can all benefit?

A recent study dives into these questions, looking at when and how cooperation in a supply chain can lead to greater stability and better outcomes for everyone involved. It uses game theory, a way of modeling strategic interactions, to understand the different ways companies can work together – or against each other.

The Power of Playing Nice: How Collaboration Changes the Game

Interconnected gears and chains symbolizing supply chain cooperation.

The study focuses on a specific scenario: a supply chain with one supplier and two manufacturers. The manufacturers are competing to sell their products to customers. However, they must also rely on the supplier for the raw materials they need. This creates a web of both competition and interdependence. The researchers wanted to find out what kinds of collaborations would be stable, meaning no company would be tempted to break away and go it alone.

One of the key ideas explored in the research is that the value of cooperation isn't just about who you're working with, but also how your competitors are behaving. In other words, the benefits of a partnership depend on the overall landscape of the market.

Teaming Up: Companies might pool their resources to attract more customers or improve their service.
Going It Alone: Sometimes, businesses find they're better off competing independently.
Strategic Alliances: Companies might form partnerships with suppliers or even with each other to gain an edge.

This approach leads to some surprising findings that challenge the traditional view of businesses as always being at each other's throats.

The Takeaway: Strategic Alliances Can Reshape the Supply Chain

This research offers a new perspective on how businesses can thrive in a competitive environment. It shows that cooperation isn't always a disadvantage; in some cases, it can lead to greater stability and higher profits for everyone involved. By understanding the dynamics of these strategic interactions, companies can make smarter decisions about when to team up and when to go it alone.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2401.04939,

Title: Partition-Form Cooperative Games In Two-Echelon Supply Chains

Subject: econ.th

Authors: Gurkirat Wadhwa, Tushar Shankar Walunj, Veeraruna Kavitha

Published: 10-01-2024

Everything You Need To Know

In a supply chain, why might companies that are typically rivals consider working together?

Companies that are rivals might consider working together in a supply chain to boost profits and achieve greater stability. This cooperation can lead to improved outcomes for everyone involved in the production process, from the supplier of raw materials to the manufacturers of finished products. Strategic alliances can help in attracting more customers or improving service by pooling resources.

How does game theory help in understanding supply chain cooperation?

Game theory provides a way of modeling strategic interactions between companies in a supply chain. It helps to understand the different ways companies can work together or against each other, and predict the stability and outcomes of these interactions. By using game theory, the impacts of decisions around pricing, production, and customer attraction can be better understood.

What are the different approaches businesses can take in a supply chain, and what are the implications of each?

Businesses in a supply chain can choose to team up, go it alone, or form strategic alliances. Teaming up involves pooling resources to attract more customers or improve service. Going it alone means competing independently. Strategic alliances involve forming partnerships with suppliers or even competitors to gain an edge. The choice depends on the market landscape and the behavior of competitors. Cooperation can lead to greater stability and higher profits, while competition may be better in other situations.

What is the role of a supplier in a supply chain with competing manufacturers, and how does this relationship affect collaboration?

In a supply chain with competing manufacturers, the supplier provides the raw materials needed by each manufacturer. This creates both competition and interdependence. The manufacturers compete to sell their products, but they rely on the supplier for materials. This dynamic affects collaboration because the benefits of a partnership depend on how competitors are behaving and the overall market landscape. Strategic alliances can become an option between the supplier and manufacturers.

How can strategic alliances reshape a supply chain, and what are the potential benefits and risks?

Strategic alliances can reshape a supply chain by fostering cooperation and stability. The potential benefits include greater stability, higher profits, and improved outcomes for all participants. By teaming up, companies can make smarter decisions about when to collaborate and when to compete. Risks might involve the potential for one company to become too reliant on another or for the alliance to stifle innovation. Understanding the dynamics of these strategic interactions is crucial for making informed decisions.