Pricing model of two-echelon supply chain for substitutable products based on double-interval grey-numbers

Abstract

The present study investigates a two-echelon supply chain including a usual retailer and two competing manufacturers. The objective function of our model is the maximization of the whole profit of the supply chain, which consists of the stochastic demand, shortage cost, and holding costs. This paper aims to analyze a single period with two products to define the optimum retail prices and wholesales under different game theory approaches (e.g., Bertrand, cooperation, and Stackelberg competitions) based on Double Interval Grey Numbers (DIGN). The other aim of this paper is to specify the price using the manufacturers and the common retailer and considering the stochastic different channel power structures and demand function. In this paper, it is considered that different power structures of channel members may affect the optimal pricing decisions. In this paper, two pricing policies of manufacturers, eight pricing models and various structures of distribution channel members are utilized. In these pricing models, the impacts of retail substitutability are evaluated on the decisions of the chain members and the equilibrium profits. In this paper, the products are substitutable and the demand is stochastic. In this model, the demand is not certain then, we may have shortages or unsold products. Finally, sensitivity analysis is provided for illustrating the theoretical outcomes established in each case.

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