Price competition in duopoly supply chains with stochastic demand

Abstract In the literature, substantial researches have been carried out on supply chain coordination. The majority of these studies suggest a mechanism that enforces the supply chain members to follow the strategies that produce the equilibrium of an integrated supply chain. Moreover, most of researches do not consider the competition among supply chains. In this study, we consider an industry consisting of two distinct supply chains which compete with each other over price. Three algorithms are presented to calculate the equilibrium of three possible industry structures. It is assumed that demand is stochastic with additive form whose random component has a uniform distribution. Furthermore, the effect of competition and demand uncertainty intensity on the Nash equilibrium of the structures and supply chains’ profits are discussed in a numerical example.

[1]  Fernando Bernstein,et al.  Decentralized Supply Chains with Competing Retailers Under Demand Uncertainty , 2005, Manag. Sci..

[2]  Shanlin Yang,et al.  Two-echelon supply chain models: Considering duopolistic retailers' different competitive behaviors , 2006 .

[3]  Desheng Dash Wu,et al.  Bargaining in competing supply chains with uncertainty , 2009, Eur. J. Oper. Res..

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

[5]  Elodie Adida,et al.  Supply Chain Competition with Multiple Manufacturers and Retailers , 2011, Oper. Res..

[6]  Richard Staelin,et al.  An Industry Equilibrium Analysis of Downstream Vertical Integration , 2008, Mark. Sci..

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

[8]  G. Gallego,et al.  Supply Chain Coordination in a Market with Customer Service Competition , 2004 .

[9]  Gérard P. Cachon.  Stock Wars: Inventory Competition in a Two-Echelon Supply Chain with Multiple Retailers , 2001, Oper. Res..

[10]  Fernando Bernstein,et al.  Coordination Mechanisms for Supply Chains Under Price and Service Competition , 2007, Manuf. Serv. Oper. Manag..

[11]  Maqbool Dada,et al.  Pricing and the Newsvendor Problem: A Review with Extensions , 1999, Oper. Res..

[12]  S. C. Choi,et al.  Price competition in a duopoly common retailer channel , 1996 .

[13]  M. Parlar,et al.  Game Theoretic Applications in Supply Chain Management: A Review , 2005 .

[14]  A. Coughlan.  Competition and Cooperation in Marketing Channel Choice: Theory and Application , 1985 .

[15]  Suman Mallik,et al.  Cross sales in supply chains: An equilibrium analysis , 2010 .

[16]  Edward J. Anderson,et al.  Price competition with integrated and decentralized supply chains , 2010, Eur. J. Oper. Res..

[17]  K. Moorthy.  Strategic Decentralization in Channels , 1988 .

[18]  Gérard P. Cachon,et al.  Game Theory in Supply Chain Analysis , 2004 .

[19]  Ming Fan,et al.  A supply chain model with direct and retail channels , 2008, Eur. J. Oper. Res..

[20]  Tiaojun Xiao,et al.  Price and service competition of supply chains with risk-averse retailers under demand uncertainty , 2008 .

[21]  Kin Keung Lai,et al.  Manufacturer's revenue-sharing contract and retail competition , 2008, Eur. J. Oper. Res..

[22]  S. C. Choi,et al.  Price Competition in a Channel Structure with a Common Retailer , 1991 .

[23]  Sarada Prasad Sarmah,et al.  Coordination and price competition in a duopoly common retailer supply chain , 2010, Comput. Ind. Eng..

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

[25]  Tiaojun Xiao,et al.  Price competition, cost and demand disruptions and coordination of a supply chain with one manufacturer and two competing retailers , 2008 .

[26]  Jianwei Huang,et al.  Managing Supply Uncertainty Under Chain-to-Chain Competition , 2009 .