Price Competition Between Two Leader-Follower Supply Chains, A Case Study

We develop a model for a real-world case problem as a price competition model between two leader-follower supply chains that each of them consists of a manufacturer and a retailer. The manufacturer produces partially differentiated products and sells to the market through its retailer. The retailer sells the products of the manufacturer to the market by adding some values to the products and gains margin as a fraction of the all income of selling products. We use a two-stage Stackelberg game model to investigate the dynamics between these supply chains and obtain the optimal prices of products. We explore the effect of varying the level of substitutability coefficient of two products on the profits of the leader and follower supply chains and derive some managerial implications. We find that the follower supply chain has an advantage when the products are highly substitutable. Also, we study the sensitivity analysis of the fraction of requested margin by retailer on the profit of supply chains.

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

[2]  Zugang Liu,et al.  Consumer environmental awareness and competition in two-stage supply chains , 2012, Eur. J. Oper. Res..

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

[4]  Ding Zhang.  A network economic model for supply chain versus supply chain competition , 2006 .

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

[6]  Tiaojun Xiao,et al.  Risk sharing and information revelation mechanism of a one-manufacturer and one-retailer supply chain facing an integrated competitor , 2009, Eur. J. Oper. Res..

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

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

[9]  Yu Qian.  Competitive parallel distribution channels with move sequence , 2006 .

[10]  R. Staelin,et al.  Vertical Strategic Interaction: Implications for Channel Pricing Strategy , 1997 .

[11]  Minakshi Trivedi,et al.  Distribution Channels: An Extension of Exclusive Retailership , 1998 .

[12]  Liming Wang,et al.  Management strategy of materials supply for manufacturing organizations , 2007, Comput. Ind. Eng..

[13]  Can Saygin,et al.  Impact of information sharing on supply chain performance , 2012 .

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

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

[16]  Albert Y. Ha,et al.  Contracting and Information Sharing Under Supply Chain Competition , 2008, Manag. Sci..

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

[18]  Albert Y. Ha,et al.  Sharing Imperfect Demand Information in Competing Supply Chains with Production Diseconomies , 2008 .

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