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

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.