IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v178y2016icp12-21.html
   My bibliography  Save this article

Equilibrium analysis of pricing competition and cooperation in supply chain with one common manufacturer and duopoly retailers

Author

Listed:
  • Huang, Hu
  • Ke, Hua
  • Wang, Lei

Abstract

This paper considers a pricing competition and cooperation problem in a two-echelon supply chain with one common manufacturer and duopoly retailers. Six decentralized game models are built to examine how pricing strategies (Bertrand and collusion) and power structures (manufacturer-dominant, retailers-dominant and non-dominant) affect supply chain members' performance. Specifically, without loss of generality, we rewrite our models as systems including only two parameters (retail substitutability and asymmetric parameter which represents the non-price difference between the two retailers) by standardizing prices and quantities. It is found that, regardless of the power structures, the two retailers' collusion behaviors will increase the sales prices and reduce the quantities of the product. The results demonstrate that whether the duopoly retailers benefit from their collusion behaviors depends on the power structures and the two parameters. We also state the conditions under which the manufacturer is better off giving up its power and making decision simultaneously with the two retailers even if it can move first. Some other managerial highlights are also presented in this paper.

Suggested Citation

  • Huang, Hu & Ke, Hua & Wang, Lei, 2016. "Equilibrium analysis of pricing competition and cooperation in supply chain with one common manufacturer and duopoly retailers," International Journal of Production Economics, Elsevier, vol. 178(C), pages 12-21.
  • Handle: RePEc:eee:proeco:v:178:y:2016:i:c:p:12-21
    DOI: 10.1016/j.ijpe.2016.04.022
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527316300561
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.ijpe.2016.04.022?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Xiao, Tiaojun & Choi, Tsan-Ming & Cheng, T.C.E., 2014. "Product variety and channel structure strategy for a retailer-Stackelberg supply chain," European Journal of Operational Research, Elsevier, vol. 233(1), pages 114-124.
    2. Ma, Shanshan & Lin, Jie & Zhao, Xuan, 2016. "Online store discount strategy in the presence of consumer loss aversion," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 1-7.
    3. S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
    4. Zhao, Jing & Tang, Wansheng & Wei, Jie, 2012. "Pricing decision for substitutable products with retail competition in a fuzzy environment," International Journal of Production Economics, Elsevier, vol. 135(1), pages 144-153.
    5. Wu, Cheng-Han & Chen, Chieh-Wan & Hsieh, Chung-Chi, 2012. "Competitive pricing decisions in a two-echelon supply chain with horizontal and vertical competition," International Journal of Production Economics, Elsevier, vol. 135(1), pages 265-274.
    6. Yang, Shilei & Shi, Victor & Jackson, Jonathan E., 2015. "Manufacturers׳ channel structures when selling asymmetric competing products," International Journal of Production Economics, Elsevier, vol. 170(PB), pages 641-651.
    7. Wu, Desheng & Baron, Opher & Berman, Oded, 2009. "Bargaining in competing supply chains with uncertainty," European Journal of Operational Research, Elsevier, vol. 197(2), pages 548-556, September.
    8. Zhao, Jing & Wei, Jie & Li, Yongjian, 2014. "Pricing decisions for substitutable products in a two-echelon supply chain with firms׳ different channel powers," International Journal of Production Economics, Elsevier, vol. 153(C), pages 243-252.
    9. Huang, Wei & Swaminathan, Jayashankar M., 2009. "Introduction of a second channel: Implications for pricing and profits," European Journal of Operational Research, Elsevier, vol. 194(1), pages 258-279, April.
    10. Anderson, Edward J. & Bao, Yong, 2010. "Price competition with integrated and decentralized supply chains," European Journal of Operational Research, Elsevier, vol. 200(1), pages 227-234, January.
    11. Li, Tingting & Xie, Jinxing & Zhao, Xiaobo, 2015. "Supplier encroachment in competitive supply chains," International Journal of Production Economics, Elsevier, vol. 165(C), pages 120-131.
    12. Timothy W. McGuire & Richard Staelin, 1983. "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, INFORMS, vol. 2(2), pages 161-191.
    13. Abel P. Jeuland & Steven M. Shugan, 1983. "Managing Channel Profits," Marketing Science, INFORMS, vol. 2(3), pages 239-272.
    14. Wang, Wei & Li, Gang & Cheng, T.C.E., 2016. "Channel selection in a supply chain with a multi-channel retailer: The role of channel operating costs," International Journal of Production Economics, Elsevier, vol. 173(C), pages 54-65.
    15. Xiao, Tiaojun & Qi, Xiangtong, 2008. "Price competition, cost and demand disruptions and coordination of a supply chain with one manufacturer and two competing retailers," Omega, Elsevier, vol. 36(5), pages 741-753, October.
    16. Anne T. Coughlan, 1985. "Competition and Cooperation in Marketing Channel Choice: Theory and Application," Marketing Science, INFORMS, vol. 4(2), pages 110-129.
    17. Dumrongsiri, Aussadavut & Fan, Ming & Jain, Apurva & Moinzadeh, Kamran, 2008. "A supply chain model with direct and retail channels," European Journal of Operational Research, Elsevier, vol. 187(3), pages 691-718, June.
    18. Zhao, Jing & Tang, Wansheng & Zhao, Ruiqing & Wei, Jie, 2012. "Pricing decisions for substitutable products with a common retailer in fuzzy environments," European Journal of Operational Research, Elsevier, vol. 216(2), pages 409-419.
    19. Charles A. Ingene & Mark E. Parry, 1995. "Channel Coordination When Retailers Compete," Marketing Science, INFORMS, vol. 14(4), pages 360-377.
    20. Ding, Qing & Dong, Ciwei & Pan, Zhicong, 2016. "A hierarchical pricing decision process on a dual-channel problem with one manufacturer and one retailer," International Journal of Production Economics, Elsevier, vol. 175(C), pages 197-212.
    21. Abel P. Jeuland & Steven M. Shugan, 1988. "Note—Channel of Distribution Profits When Channel Members Form Conjectures," Marketing Science, INFORMS, vol. 7(2), pages 202-210.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Syed Asif Raza, 2022. "A bibliometric analysis of pricing models in supply chain," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 228-251, April.
    2. Song, Haiqing & Duan, Housheng & Deng, Sijing & Xu, Jiayan, 2022. "Brand extension and channel structure: An analysis of the effects of social influence," Omega, Elsevier, vol. 110(C).
    3. Hu Huang & Hua Ke, 2017. "Pricing decision problem for substitutable products based on uncertainty theory," Journal of Intelligent Manufacturing, Springer, vol. 28(3), pages 503-514, March.
    4. Matsui, Kenji, 2018. "When and what wholesale and retail prices should be set in multi-channel supply chains?," European Journal of Operational Research, Elsevier, vol. 267(2), pages 540-554.
    5. Matsui, Kenji, 2016. "Asymmetric product distribution between symmetric manufacturers using dual-channel supply chains," European Journal of Operational Research, Elsevier, vol. 248(2), pages 646-657.
    6. Minakshi Trivedi, 1998. "Distribution Channels: An Extension of Exclusive Retailership," Management Science, INFORMS, vol. 44(7), pages 896-909, July.
    7. Messinger, Paul R., 2016. "The role of fairness in competitive supply chain relationships: An experimental studyAuthor-Name: Choi, Sungchul," European Journal of Operational Research, Elsevier, vol. 251(3), pages 798-813.
    8. Zhang, Yumeng & Hezarkhani, Behzad, 2021. "Competition in dual-channel supply chains: The manufacturers' channel selection," European Journal of Operational Research, Elsevier, vol. 291(1), pages 244-262.
    9. Shih-Pin Chen, 2017. "Effects of fuzzy data on decision making in a competitive supply chain," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(10), pages 1146-1160, October.
    10. Hu, Yihong & Qu, Shengnan & Li, Guo & Sethi, Suresh P., 2021. "Power structure and channel integration strategy for online retailers," European Journal of Operational Research, Elsevier, vol. 294(3), pages 951-964.
    11. Jie Wei & Jing Zhao, 2016. "Pricing decisions for substitutable products with horizontal and vertical competition in fuzzy environments," Annals of Operations Research, Springer, vol. 242(2), pages 505-528, July.
    12. Fabio Caldieraro & Anne T. Coughlan, 2007. "Spiffed-Up Channels: The Role of Spiffs in Hierarchical Selling Organizations," Marketing Science, INFORMS, vol. 26(1), pages 31-51, 01-02.
    13. Matsui, Kenji, 2017. "When should a manufacturer set its direct price and wholesale price in dual-channel supply chains?," European Journal of Operational Research, Elsevier, vol. 258(2), pages 501-511.
    14. Taleizadeh, Ata Allah & Sadeghi, Razieh, 2019. "Pricing strategies in the competitive reverse supply chains with traditional and e-channels: A game theoretic approach," International Journal of Production Economics, Elsevier, vol. 215(C), pages 48-60.
    15. Chen, Xu & He, Jinzhe & Wang, Xiaojun, 2024. "Effects of product substitutability and power relationships on performance in triadic supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 183(C).
    16. Jin, Yannan & Wu, Xiaole & Hu, Qiying, 2017. "Interaction between channel strategy and store brand decisions," European Journal of Operational Research, Elsevier, vol. 256(3), pages 911-923.
    17. Luo, Zheng & Chen, Xu & Chen, Jing & Wang, Xiaojun, 2017. "Optimal pricing policies for differentiated brands under different supply chain power structures," European Journal of Operational Research, Elsevier, vol. 259(2), pages 437-451.
    18. Li, Tingting & Xie, Jinxing & Zhao, Xiaobo, 2015. "Supplier encroachment in competitive supply chains," International Journal of Production Economics, Elsevier, vol. 165(C), pages 120-131.
    19. Zhao, Jing & Wei, Jie & Li, Yongjian, 2014. "Pricing decisions for substitutable products in a two-echelon supply chain with firms׳ different channel powers," International Journal of Production Economics, Elsevier, vol. 153(C), pages 243-252.
    20. Jianhua Ma & Xingzheng Ai & Wen Yang & Yanchun Pan, 2019. "Decentralization versus coordination in competing supply chains under retailers’ extended warranties," Annals of Operations Research, Springer, vol. 275(2), pages 485-510, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:178:y:2016:i:c:p:12-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.