Optimal Bankruptcy Decisions of Supply Chain Agents under Uncertainty

This paper aims to investigate the bankrupcy decisions in the context of a supply chain with many upstream firms and one downstream firm, who face price uncertainty evovling as a stochastic process. The optimal bankrupcy thresholds are analytically derived for both upstream and downstream firms in this framework. Following the optimal exit strategies proposed in this paper, all firms would collaboratively obtain optimized supply chain value in return. Based on the bargaining power of a firm in the supply chain, a value could be divided from the optimal supply chain value and distributed to the firm. This paper provides business practitioners with insights into the optimal collaborative behavior of supply chain members to conquer the uncertainty which commonly bothers them.