Perspective-Invariant Nash Bargaining in Supply Chains: Strategic Implementation and Simulation Analysis

Abstract

This paper investigates the bargaining problem in a supply chain between a supplier and a retailer, with a focus on perspective invariance. The analysis approaches the bargaining problem from two complementary viewpoints: one based on the benefits at the point of disagreement and another based on the sacrifice of the ideal point. By introducing the principle of perspective invariance alongside the principles of isometric and contraction independence, it demonstrates that the only solution producing consistent and identical results in both frameworks is the symmetric Nash bargaining solution. A strategic implementation mechanism for this solution is also proposed, modeled as a non-cooperative game whose perfect subgame equilibrium results in a symmetric Nash allocation. For empirical validation, a set of bargaining problems is simulated, revealing that the perspective invariance error is essentially zero. These findings suggest that this approach can eliminate negotiation framing effects and enhance coordination and fairness in supply chain negotiations.