Supply chain pricing and effort decisions with the participants’ belief under the uncertain demand

This paper addresses the pricing and effort decisions of a supply chain consisting of a manufacturer and a retailer. All the parties make optimal decisions to maximize their profits with uncertainty of demand under their confidence levels. Taking this into account, Stackelberg models are formulated to study the impact of the confidence levels on pricing and effort decisions for the decentralized and centralized supply chains. We obtain that the confidence levels of participants have a significant impact on the pricing and effort decisions. Specifically, when the retailer’s confidence level is increasing, the retail price, the wholesales price, the sales effort, the profit of each member and the total profit of supply chain are all increasing. However, the manufacturer’s confidence level is not independent of the power structure, i.e., there are different characteristics under the different power structures. The power structure has an outstanding effect on the profit of each member in the supply chain. The leader’s profit is always more than that of the follower, and the profit of upstream is more than that of the downstream when they have the same power. We use numerical experiments to verify the validity of the model.

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