Pricing Competition and Cooperation in Dual—Channel Supply Chain with Manufacturer Service Effects

This study examines cooperation and competition in a dual—channel supply chain. There are two-echelon supply chain with one manufacturer and one retailer in the supply chain. Two channels are composed so that manufacturer not only sells the product to end customer in direct-channel, but also, he can sell the product to the retailer by using retailer channel. Then, the retailer by subjoining value-added cost to the product sells it to the customer in which the market demand is uncertain. The problem is formulated as four different game models and the optimal solutions (manufacturer wholesale price, retailer price and manufacturer service level) are obtained. The game models include Nash equilibrium, manufacturer Stackelberg, retailer Stackelberg, and cooperation. Furthermore, the effect of manufacturer service level to increasing the level of customer satisfaction is taken into account. According to sensitivity analysis, we obtained the impact of demand sensitivity, channel loyalty, service level efficiency parameter and retailer value added efficiency on retailer price, manufacturer price, service level, retailer profit, manufacturer profit, and whole supply chain profit which increases the sensitivity analysis parameters in comparison to any other profit of competitive and Nash equilibrium models, cooperative model. Therefore, collaboration in the supply chain is highly important and could increase total profits. The results show that manufacturer services strongly influence the pricing decisions of the manufacturer and the retailer

Keywords:

Supply chain , Pricing competition , cooperation , Nash equilibrium , Dual-channel , Service effect