Examining price and service competition among retailers in a supply chain under potential demand disruption

© 2017 Elsevier Ltd Supply chain disruptions management has attracted significant attention among researchers and practitioners. The paper aims to examine the effect of potential market demand disruptions on price and service level for competing retailers. To investigate the effect of potential demand disruptions, we consider both a centralized and a decentralized supply chain structure. To analyze the decentralized supply chain, the Manufacturing Stackelberg (MS) game theoretical approach was undertaken. The analytical results were tested using several numerical analyses. It was shown that price and service level investment decisions are significantly influenced by demand disruptions to retail markets. For example, decentralized decision makers tend to lower wholesale and retail prices under potential demand disruptions, whereas a proactive retailer needs to increase service level with an increased level of possible disruptions. This research may aid managers to analyze disruptions prone market and to make appropriate decision for price and service level. The manufacturer or the retailers will also be able to better determine when to close a market based on the proposed analysis by considering anticipated disruptions. The benefits and usefulness of the proposed approach are explained through a real-life case adopted from a toy supply chain in Bangladesh

Equilibrium Analysis of Channel Structure Strategies in Uncertain Environment

Abstract In this paper, we consider a pricing decision problem with two competing supply chains which distribute differentiated but competing products in the same market. Each chain can be vertically integrated or decentralized based on the choice of the manufacturer. The manufacturing costs, sales costs and consumer demands are characterized as uncertain variables, whose distributions are estimated by experienced experts. Meanwhile, uncertainty theory and game theory are employed to formulate the pricing decision problems. The equilibrium behaviors (how the supply chain members make their own pricing decisions on wholesale prices and retailer markups) at operational level under three possible scenarios are derived. Numerical experiments are also given to explore the impacts of the parameters’ uncertain degrees on supply chain members’ pricing decisions. The results demonstrate that the supply chain uncertain factors have great influences on equilibrium prices. In addition, we also evaluate the effects of competing intensity (substitutability) of the two products on the strategy behaviors, vertically integrated channel strategy versus decentralized strategy, of the manufacturers. It is found that the manufacturers are better off to distribute their products through a decentralized channel rather than an integrated one when the substitutability is greater than some value. Besides, the uncertain factors in the supply chain might reduce the value contrast to the one in deterministic case. Some other interesting managerial highlights are also provided in this paper

Strategic integration decision under supply chain competition in the presence of online channel

This study explores the pricing decisions of substitutable products for two competing supply chains in the presence of an online channel. Each supply chain consisting of a single manufacturer and an exclusive retailer and one of the manufacturers distributes products through the online channel. We examine optimal decisions under five scenarios to explore how the strategic cooperation between two manufacturers at the upstream horizontal level or with the retailer at the vertical level affects product pricing decisions and the performance of two supply chains? The results reveal that decisions for cooperation with competing manufacturers and opening an online channel are correlated. In the absence of an online channel, cooperation with their respective retailer can lead to a higher supply chain profit. However, if a manufacturer opens an online channel, then cooperation with competing manufacturers can lead to a higher supply chain profit. Under the vertical integration, total supply chain profit might be lower compared to a scenario where members in each supply chain remain independent. Consumers also need to pay more for products

Interactions of Bargaining Power and Introduction of Online Channel in Two Competing Supply Chains

This paper studies the effect of dual-channel format on supply chain’s competition ability and the effect of different bargaining powers on the competition between two supply chains and the optimal pricing decisions of all supply chain members when one supply chain introduces an online retailing channel. We develop four game models and obtain the optimal pricing decisions in closed form of these models and give some sensitivity analysis through numerical approach. Some new managerial insights are obtained as follows: Regardless of the two supply chain members’ bargaining forms, the optimal price, the maximal demand, and the maximal profit decrease as the self-price sensitivity decreases. The industry holds advantage in getting higher profit when the supply chain without online retailing channel is led by the retailer. In addition, we find that a manufacturer as a leader of its supply chain can get more profit when the competing supply chain’s leader is the manufacturer than when the competing supply chain’s leader is the retailer

Distribution channel strategies in a mixed market

This paper studies equilibrium channel strategies in a mixed market with a public firm and a private firm. The public firm is concerned with social welfare, while the private firm aims to maximize its own profit. Each firm decides whether to adopt an integrated or a decentralized channel. We examine two standard market competition modes, Bertrand and Cournot. Within each competition mode, we consider two typical vertical contracts, wholesale-price and two-part tariff contracts. Our results suggest that equilibrium channel structures depend on the market competition mode, the vertical contract form, and the level of product substitutability. Specifically, the channel strategy of the private firm depends mainly on the vertical contract form: under a two-part tariff contract, the private firm always chooses decentralization; under a wholesale-price contract, the private firm chooses integration for most scenarios except for highly substitutable products under Bertrand competition (i.e., under very intense competition). The channel strategy of the public firm depends mainly on the competition mode: under Bertrand competition, the public firm always chooses decentralization; under Cournot competition, the public firm always chooses the opposite of the private firm׳s strategy

Centralized Supply Chain Network Ddesign: Monopoly, Duopoly, and Ooligopoly Competitions under Uncertainty

This paper presents a competitive supply chain network design problem in which one, two, or three supply chains are planning to enter the price-dependent markets simultaneously in uncertain environments and decide to set the prices and shape their networks. The chains produce competitive products either identical or highly substitutable. Fuzzy multi-level mixed integer programming is used to model the competition modes, and then the models are converted into an integrated bi-level one to be solved, in which the inner part sets the prices in dynamic competition and the outer part shapes the network cooperatively.Finally, a real-world problem is investigatedto illustrate how the bi-level model works and discuss how price, market share, total income, and supply chain network behave with respect to key marketing activities such as advertising, promotions, and brand loyalty

Product bundling and advertising strategy for a duopoly supply chain: A power-balance perspective

The paper studies product bundling in a duopoly supply chain network under the influence of different power-balance structures, bundling decisions and advertising efforts on total supply chain profit. Mathematical models comprising two manufacturers and a single retailer are developed to capture the impact of bundling policy and advertisement strategy under three power-balance structures, namely Manufacturer Stackelberg, Retailer Stackelberg and Vertical Nash. Following game theory models and numerical examples, the study found that the total profit of the supply chain is undifferentiated under the manufacturer Stackelberg and Vertical Nash case in the manufacturer bundling and retailer bundling strategies. However, total supply chain profit under manufacturer bundling strongly dominates under retailer bundling in Retailer Stackelberg and Vertical Nash, and remains valid under multiple settings of market size, price elasticity and advertising elasticity. It is also found that manufacturer bundling is significantly affected by advertising effort compared to retailer bundling. The study contributes to the literature interfacing supply chain and marketing by studying bundling policy and advertising strategy simultaneously for homogenous products, under various power-balance structures and price competitio