Pricing in a two-echelon supply chain with different market powers: game theory approaches

Abstract

In this research, the optimal pricing decisions for two complementary products in a two-echelon supply chain under two scenarios are studied. The proposed supply chain in each echelon includes one retailer and two manufacturers and the same complementary products are produced. In the first scenario, we assume the unit manufacturing costs of the complementary products in each echelon are the same, while in the second one the different unit manufacturing costs are supposed and lead to demand leakage from the echelon with the higher unit manufacturing cost to the echelon with the lower unit manufacturing cost. Moreover, under the second scenario, the products with lower price are replaced with the higher price products. The purpose of this study is to analyze the effects of different market powers between the manufacturers and the retailer and the demand leakage on the optimal wholesale and retail prices and also on the profit of the chain. The relationships between the manufacturers and the retailer are modeled by the MS-Stackelberg and MS-Bertrand game-theoretic approach where the manufacturers are leaders and the retailers are followers.

Decentralized supply chain network design: monopoly, duopoly and oligopoly competitions under uncertainty

“…Also this is usually related to operational characteristics and leads to Nash game; most of the dynamic games in SC literature are unconstrained models that solved by differential systems (Xiao and Yang 2008;Zhang 2006;Dias 2010, 2013;Sinha and Sarmah 2010;Friesz et al 2011, Jain et al 2014Chen et al 2015;Nagurney et al 2015;Mousavi et al 2016;Santibanez-Gonzalez and Diabat 2016;Hjaila et al 2016a;Jahangoshai Rezaee et al 2017;Lipan et al 2017). (3) Competition with foresight: in this competition, the rivals show reactions to the entry of new comer in sequential manner and usually this is related to strategic characteristics; this competition leads to bilevel or multi-level models and stackelberg games (Drezner and Drezner 1998;Plastria and Vanhaverbeke 2008;Kucukaydın et al 2011, Zhang and Liu 2013Yue and You 2014;Zhu 2015;Drezner et al 2015;Taleizadeh and Charmchi 2015;Yang et al 2015, Esmaeilzadeh andTaleizadeh 2016;Hjaila et al 2016b;Aydin et al 2016;Ezimadu and Nwozo 2017;Genc andGiovanni 2017. Eiselt andLaporte 1997;Krass and Pesch 2012 have done a review of this kind of competition.…”

“…Also in SC competition literature, there are three kinds of competitions: horizontal competition: competition between firms of one tier of a SC (Nagurney et al 2002;Dong et al 2004;Cruz 2008;Zhang and Zhou 2012;Qiang et al 2013;Huseh 2015;Qiang 2015;Nagurney 2016, Nagurney et al 2016); vertical competition: competition between the firms of different tiers of a SC (Bernstein and Federgruen 2005;Anderson and Bao 2000;Chen et al 2013, Wu 2013Zhao and Wang 2015;Zhang et al 2015;Bai et al 2016;Bo and Li 2016;Esmaeilzadeh and Taleizadeh 2016;Huang et al 2016;Wang et al 2017;Genc and Giovanni 2017;Chaeb and Rasti-Barzoki 2016); and SC versus SC: competition between SCs (Boyaci and Gallego 2004;Xiao and Yang 2008;Zhang 2006;Li et al 2013;Chung and Kwon 2016). Ezimadu and Nwozo (2017) used Sethi model to models the dynamic effect of the manufacturer and retailer's advertising efforts on sale and by the help of control technique and stochastic differential game theory the players' advertising strategies and the long-run value of the awareness share are obtained.…”

“…Ezimadu and Nwozo (2017) used Sethi model to models the dynamic effect of the manufacturer and retailer's advertising efforts on sale and by the help of control technique and stochastic differential game theory the players' advertising strategies and the long-run value of the awareness share are obtained. Esmaeilzadeh and Taleizadeh (2016) proposed the optimal pricing decisions for two complementary products in a two-echelon supply chain composed of one retailer and two manufacturers under two scenarios. The relationships between the manufacturers and the retailer are modeled by the MS-Stackelberg and MSBertrand game-theoretic approach where the manufacturers are leaders and the retailers are followers.…”

Complexity Dynamic Character Analysis of Retailers Based on the Share of Stochastic Demand and Service

“…Esmaeilzadeh and Taleizadeh [18] conducted the optimal pricing decisions for two complementary products in a twoechelon supply chain under different market powers with game theory approaches. Ma and Guo [19] examined the impacts of information on the dynamical price game in two Bertrand game models, whereby the player obtains information of his rival before making decisions.…”

Optimal Pricing Strategies for Bundled Channel in a Smart Phone Supply Chain

“…Taleizadeh and Charmchi (2015) used Stackelberg game theory model to analyse pricing decisions in a two-echelon supply chain (one manufacturer, one retailer) with two complementary goods under cooperative advertising (agreement between manufacturer and retailer to share advertising cost at the local level). Esmaeilzadeh and Taleizadeh (2016) is another notable work in this area. Xiao et al (2013) decided distribution channel strategies for a manufacturer with two complementary products.…”