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Price competition with integrated and decentralized supply chains

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  • Anderson, Edward J.
  • Bao, Yong

Abstract

We consider price competition with a linear demand function and compare two cases. In the first case each distribution channel is vertically integrated, while in the second, decentralised, case the manufacturers and retailers act independently. We explore the effect of varying the level of price competition on the profits of the industry participants and demonstrate the important role played by the spread of underlying market shares. The coefficient of variation of these market shares determines whether decentralised supply chains can outperform integrated supply chains with an appropriate level of competition.

Suggested Citation

  • Anderson, Edward J. & Bao, Yong, 2010. "Price competition with integrated and decentralized supply chains," European Journal of Operational Research, Elsevier, vol. 200(1), pages 227-234, January.
    • Handle: RePEc:eee:ejores:v:200:y:2010:i:1:p:227-234
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    References listed on IDEAS

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    Keywords

    Supply chain management;

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