Decentralized Supply Chains with Competing Retailers Under Demand Uncertainty

In this paper, we investigate the equilibrium behavior of decentralized supply chains with competing retailers under demand uncertainty. We also design contractual arrangements between the parties that allow the decentralized chain to perform as well as a centralized one. We address these questions in the context of two-echelon supply chains with a single supplier servicing a network of (competing) retailers, considering the following general model: Retailers face random demands, the distribution of which may depend only on its own retail price ( noncompeting retailers) or on its own price as well as those of the other retailers ( competing retailers), according to general stochastic demand functions.

[1]  J. Spengler.  Vertical Integration and Antitrust Policy , 1950, Journal of Political Economy.

[2]  Theodore Groves,et al.  Incentives in Teams , 1973 .

[3]  John B. Bryant.  Competitive Equilibrium with Price Setting Firms and Stochastic Demand , 1980 .

[4]  Y. Marignac,et al.  Note , 1951, Neurochemistry International.

[5]  M. Parlar.  Game theoretic analysis of the substitutable product inventory problem with random demands , 1988 .

[6]  Paul R. Milgrom,et al.  Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities , 1990 .

[7]  X. Vives.  Nash equilibrium with strategic complementarities , 1990 .

[8]  Robert C. Blattberg,et al.  Sales Promotion: Concepts, Methods, and Strategies , 1990 .

[9]  M. Parlar,et al.  A three-person game theory model arising in stochastic inventory control theory , 1994 .

[10]  R. Deneckere,et al.  Demand Uncertainty and Price Maintenance: Markdowns as Destructive Competition , 1995 .

[11]  I. Png,et al.  Returns Policies: Make Money by Making Good , 1995 .

[12]  R. Deneckere,et al.  Competition over Price and Service Rate when Demand is Stochastic: A Strategic Analysis , 1995 .

[13]  Evan L. Porteus,et al.  Chapter 7.( TGM) Supply Contracts with Quantity Commitments and Stochastic Demand by Ravi Annupindi & Yehuda Bassok Chapter 8. ( TGM) Supply Chain Contracting and Coordination with Stochastic Demand , 1996 .

[14]  J. Little,et al.  A Theory of Forward Buying, Merchandising, and Trade Deals , 1996 .

[15]  Eugene Kandel.  The Right to Return , 1996, The Journal of Law and Economics.

[16]  R. Deneckere,et al.  Demand Uncertainty, Inventories, and Resale Price Maintenance , 1996 .

[17]  Kevin F. McCardle,et al.  The Competitive Newsboy , 1997, Oper. Res..

[18]  I. Png,et al.  Manufacturer's Return Policies and Retail Competition , 1997 .

[19]  S. Gilbert,et al.  Note. the Role of Returns Policies in Pricing and Inventory Decisions for Catalogue Goods , 1998 .

[20]  J. Birge,et al.  Setting Single-Period Optimal Capacity Levels and Prices for Substitutable Products , 1998 .

[21]  D. M. Topkis.  Supermodularity and Complementarity , 1998 .

[22]  Ravi Anupindi,et al.  Centralization of Stocks: Retailers Vs. Manufacturer , 1999 .

[23]  Jan A. Van Mieghem,et al.  Price Versus Production Postponement: Capacity and Competition , 1999 .

[24]  Gérard P. Cachon.  Competitive Supply Chain Inventory Management , 1999 .

[25]  Kusum L. Ailawadi,et al.  Trade Promotion: Essential to Selling through Resellers , 1999 .

[26]  X. Vives.  Oligopoly Pricing: Old Ideas and New Tools , 1999 .

[27]  S. Nahmias,et al.  Modeling Supply Chain Contracts: A Review , 1999 .

[28]  Fangruo ChenAwi.  Coordination Mechanisms for a Distribution System with One Supplier and Multiple Retailers , 2001 .

[29]  Awi Federgruen,et al.  Coordination Mechanisms for a Distribution System with One Supplier and Multiple Retailers , 2001, Manag. Sci..

[30]  Qing Li.  Competition and coordination in supply chains , 2001 .

[31]  Terry A. Taylor,et al.  Supply Chain Coordination Under Channel Rebates with Sales Effort Effects , 2002, Manag. Sci..

[32]  Nils Rudi,et al.  Centralized and Competitive Inventory Models with Demand Substitution , 2002, Oper. Res..

[33]  Fernando Bernstein,et al.  Pricing and Replenishment Strategies in a Distribution System with Competing Retailers , 2003, Oper. Res..

[34]  A. Federgruen,et al.  Dynamic inventory and pricing models for competing retailers , 2004 .

[35]  Gérard P. Cachon,et al.  Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations , 2005, Manag. Sci..