Optimal investment decisions for recovery from disruptions in the decentralized supply chains

In this paper, we investigate the optimal supplier's and buyer's reactions to supply disruption. Upon disruption, the supplier loses the supply during the recovery period. Given a delivery time contract between the supplier and buyer, the supplier can make an investment to decrease the recovery time to benefit both parties. If the supplier's capacity is recovered after the delivery time, the supplier should pay a penalty cost to the buyer for …