Pricing two substitutable products in a supply chain by considering two manufacturers and one common retailer: A game-theoretic approach

In this study, a supply chain is considered including two manufacturers and one common retailer. The manufacturers product two substitutable products and sell them to their customers. One of the manufacturers sells his products only via the common retailer, whereas another one sells directly to customers as well as via the common retailer. In this setting, a competitive behavior is established to price the products in this supply chain. Thus, a game-theoretic approach is applied based on the Manufacturers-Stackelberg game to analyze the decisions. In fact, it is assumed that the manufacturers have more decision powers than the common retailer. Thus, the manufacturers are the leaders and the common retailer is the follower. Then, a numerical example is provided and the obtained decisions are discussed. It is found that by increasing the self-price sensitivity of the demands, the profits are raised. Moreover, more the cross-price sensitivity of the demands leads to more profits for the members.

Keywords:

Optimization , Supply chain management , Manufacturing , Pricing , Game theory , Stackelberg model.