Pricing in a Two-Echelon Supply Chain with Manufacturers’ Competing to Seizing the Market in the Make-to-Order Environment by Using Game Theory

Document Type : Research Paper

Authors

Isfahan University of Technology

Abstract

This paper develops a model based on game theory to analyze a two-echelon supply chain consists of two manufacturers and two retailers, that are operating in a make-to-order environment. The considerable point in the defined supply chain is that the manufacturers by taking into account the discount to the retailer that exclusively sells their products want to seize the market. In this model, manufacturers’ brand value and customers loyalty to a brand has high importance. It should be noted that in the defined Stackelberg model retail prices would be determined after specifying the lead times. We show that the reduction in the proportion of goods received by a retailer from a manufacturer will increase its retail price, also the exclusive supplying of a good rising its wholesale price.

Keywords

Main Subjects

References

[1]   Thomas, D. J., Griffin, P. M. (1996). Coordinated supply chain management, European Journal of Operational Research, 94(1): 1-15.
[2]   Yue, J., Austin, J., Wang, M. C., Huang, Z (2006). Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount, European Journal of Operational Research, 168(1): 65-85.
[3]   Moorthy, K.S. (1985). Using Game Theory to Model Competition, Journal of Marketing Research, 22(3): 262-282.
[4]   Giannoccaro, I., Pontrandolfo, P. (2004). Supply chain coordination by revenue sharing contracts, International Journal of Production Economics, 89(2): 131-139.
[5]   El Ouardighi, F. (2014). Supply quality management with optimal wholesale price and revenue sharing contracts: A two-stage game approach, International Journal of Production Economics, 156(260-268.
[6]   Zhao, Y., Wang, S., Cheng, T.C.E. Yang, X., Huang, Z. (2010). Coordination of supply chains by option contracts: A cooperative game theory approach, European Journal of Operational Research, 207(2): 668-675.
[7]   Hennet, J.C., Arda, Y. (2008). Supply chain coordination: A game-theory approach, Engineering Applications of Artificial Intelligence, 21(3): 399-405.
[8]   Naimi Sadigh, A., Mozafari, M., Karimi, B. (2012). Manufacturer–retailer supply chain coordination: A bi-level programming approach, Advances in Engineering Software, 45(1): 144-152.
[9]   Karray, S., Amin, S. H. (2014). Cooperative advertising in a supply chain with retail competition, International Journal of Production Research, 53(1): 88-105.
[10]  Zhang, C.T., Wang, H.X., Ren, M. L. (2014). Research on pricing and coordination strategy of green supply chain under hybrid production mode, Computers & Industrial Engineering, 72:24-31.
[11]  Hafezalkotob, A. (2015). Competition of two green and regular supply chains under environmental protection and revenue seeking policies of government, Computers & Industrial Engineering, 82:103-114.
[12]  Abad, P.L. (1994). Supplier pricing and lot sizing when demand is price sensitive, European Journal of Operational Research, 78(3): 334-354.
[13]  Ekici, A., Altan, B., Özener, O. Ö. (2015). Pricing decisions in a strategic single retailer/dual suppliers setting under order size constraints, International Journal of Production Research, 1-12.
[14]  Taleizadeh, A., Noori-daryan, M. (2015). Pricing, inventory and production policies in a supply chain of pharmacological products with rework process: a game theoretic approach, Operational Research, 1-27.
[15]  Mahdiraji, H.A., Kazimieras, E., Razavi, S. H. (2015). Game Theoretic Approach For Coordinating Unlimited Multi Echelon Supply Chains, Transformations In Business & Economics, 14(2): 35.
[16]  Taleizadeh, A.A., Noori-daryan, M. (2016). Pricing, manufacturing and inventory policies for raw material in a three-level supply chain, International Journal of Systems Science, 47(4): 919-931.
[17]  Taleizadeh, A.A., Noori-daryan, M., R. Tavakkoli-Moghaddam, R. (2015). Pricing and ordering decisions in a supply chain with imperfect quality items and inspection under buyback of defective items, International Journal of Production Research, 53(15): 4553-4582.
[18]  Li, J., Liu, L. (2006). Supply chain coordination with quantity discount policy, International Journal of Production Economics, 101(1): 89-98.
[19]  Xiao, T., Qi, X. (2008). Price competition, cost and demand disruptions and coordination of a supply chain with one manufacturer and two competing retailers, Omega, 36(5): 741-753.
[20]  Cai, G., Zhang, Z. G., Zhang. M. (2009). Game theoretical perspectives on dual-channel supply chain competition with price discounts and pricing schemes, International Journal of Production Economics, 117(1): 80-96.
[21]  Tiaojun, X., Tsan-Ming, C., Cheng, T.C.E. (2015). Optimal Variety and Pricing Decisions of a Supply Chain With Economies of Scope, IEEE Transactions on Engineering Management, 62(3): 411-420.
[22]  Xia, N., Rajagopalan, S. (2009). Standard vs. Custom Products: Variety, Lead Time, and Price Competition, Marketing Science, 28(5): 887-900.
[23]  Wong, H., Eyers. D. (2010). An analytical framework for evaluating the value of enhanced customisation: an integrated operations-marketing perspective, International Journal of Production Research, 49(19): 5779-5800.
[24]  Xiao, T., Yang, D., Shen, H. (2010). Coordinating a supply chain with a quality assurance policy via a revenue-sharing contract, International Journal of Production Research, 49(1): 99-120.
[25]  Xiao, T., Choi, T. M., Cheng, T. C. E. (2014). Product variety and channel structure strategy for a retailer-Stackelberg supply chain, European Journal of Operational Research, 233(1): 114-124.
[26]  Zhang, T., Gou, Q., Liang, L., (2015). Suppliers’ competition and manufacturer’s product mix: the role of ingredient brand, 4OR, 1-15.
[27]  Xiao, T., Shi, J., Chen, G. (2014). Price and leadtime competition, and coordination for make-to-order supply chains, Computers & Industrial Engineering, 68:23-34.
[28]  Xu, Y., Gurnani, H., Desiraju, R. (2010). Strategic Supply Chain Structure Design for a Proprietary Component Manufacturer, Production and Operations Management, 19(4): 371-389.
[29]  Sinha, S., Sarmah, S. P. (2010). Coordination and price competition in a duopoly common retailer supply chain, Computers & Industrial Engineering, 59(2): 280-295.
[30]  Hotelling, H. (1929). Stability in Competition, The Economic Journal, 39(153): 41-57.
[31]  Li, J., Wang, S., Cheng, T. C. E. (2010). Competition and cooperation in a single-retailer two-supplier supply chain with supply disruption, International Journal of Production Economics, 124(1): 137-150.
[32]  Saha, S., Goyal, S. K. (2015). Supply chain coordination contracts with inventory level and retail price dependent demand, International Journal of Production Economics, 161:140-152.
Journal of Industrial Engineering Research in Production Systems
Volume 3, Issue 6 - Serial Number 6
Fall and Winter 2016
February 2016
Pages 207-219

Files

Share

How to cite

Statistics