Coordination and price competition in a duopoly common retailer supply chain

✍ Scribed by Santanu Sinha; S.P. Sarmah

• Publisher: Elsevier Science
• Year: 2010
• Tongue: English
• Weight: 826 KB
• Volume: 59
• Category: Article
• ISSN: 0360-8352
• DOI: 10.1016/j.cie.2010.04.010

✦ Synopsis

This paper analyzes the coordination and competition issues in a two-stage supply-chain distribution system where two vendors compete to sell differentiated products through a common retailer in the same market. The demand of a product not only depends on its own price, but also on the price of the other. Mathematical models have been developed to analyze the coordination issues under three different contexts: (i) price competition without channel coordination; (ii) price competition with channel coordination; and (iii) global coordination. It has been shown that under certain conditions, price competition through the dynamic process of price adjustment reaches the Nash-Bertrand equilibrium. Conditions have been derived for the Nash-Bertrand equilibrium to be dynamically stable. Further, it has been shown that duopoly competition can make consumers better-off or worse-off depending on the degree of product differentiation and the type of the product; while coordination enhances overall supply-chain profitability. The model is illustrated with suitable numerical examples.