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Optimal Pricing of competing retailers under uncertain demand-a two layer supply chain model

Author

Listed:
  • Arpita Roy

    (Heritage Institute of Technology)

  • Shib Sankar Sana

    (Bhangar Mahavidyalaya)

  • Kripasindhu Chaudhuri

    (Jadavpur University)

Abstract

The paper studies a two-echelon supply chain comprising of one manufacturer and two competing retailers with sales price dependent demand and random arrival of the customers. The manufacturer acts as the supplier who specifies wholesale price for the retailers and the retailers compete with each other announcing different sales prices. We analyse a single-period newsvendor type model to determine the optimal order quantity, considering the competing retailers’ strategies.The unsold items at the retailers are buyback to the manufacturer at less price than the sales prices.On the other hand, the retailers face shortages as the demand is uncertain in nature. The profit functions of manufacturer and two retailers are analyzed and compared following Stakelberg, Bertrand, Cournot–Bertrand and integrated approaches. Moreover, distribution-free model is analyzed for integrated profit of the chain. A numerical example is given to illustrate the theoretical results developed in each case. Computational results show that it is always beneficial in integrated system for the members of the chain.

Suggested Citation

  • Arpita Roy & Shib Sankar Sana & Kripasindhu Chaudhuri, 2018. "Optimal Pricing of competing retailers under uncertain demand-a two layer supply chain model," Annals of Operations Research, Springer, vol. 260(1), pages 481-500, January.
    • Handle: RePEc:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-015-1996-0
    DOI: 10.1007/s10479-015-1996-0
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    3. Khorshidvand, Behrooz & Soleimani, Hamed & Sibdari, Soheil & Seyyed Esfahani, Mir Mehdi, 2021. "Revenue management in a multi-level multi-channel supply chain considering pricing, greening, and advertising decisions," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    4. Muhammad Imran & Muhammad Salman Habib & Amjad Hussain & Naveed Ahmed & Abdulrahman M. Al-Ahmari, 2020. "Inventory Routing Problem in Supply Chain of Perishable Products under Cost Uncertainty," Mathematics, MDPI, vol. 8(3), pages 1-29, March.
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    6. Peng Wu & Yixi Yin & Shiying Li & Yulong Huang, 2018. "Low-Carbon Supply Chain Management Considering Free Emission Allowance and Abatement Cost Sharing," Sustainability, MDPI, vol. 10(7), pages 1-18, June.
    7. Régis Chenavaz & Octavio Escobar & Xavier Rousset, 2019. "An analytical framework for retailer price and advertising decisions for products with temperature-sensitive demand," Applied Economics, Taylor & Francis Journals, vol. 51(52), pages 5683-5693, November.
    8. Liu, Yong & Liu, Zhi-yang & Ren, Wen-wen & Lin Forrest, Jeffrey Yi, 2020. "A coordination mechanism through relational contract in a two-echelon supply chain," Journal of Retailing and Consumer Services, Elsevier, vol. 56(C).
    9. Yong Zhang & Xingyu Yang & Weiguo Zhang & Weiwei Chen, 2020. "Online ordering rules for the multi-period newsvendor problem with quantity discounts," Annals of Operations Research, Springer, vol. 288(1), pages 495-524, May.
    10. Aijun Liu & Xiaohui Ji & Sang-Bing Tsai & Hui Lu & Gang Du & Feng Li & Guodong Li & Jiangtao Wang, 2018. "An Empirical Study on the Innovation Sharing Express Box: Collaborative Consumption and the Overlay Network Design," Sustainability, MDPI, vol. 10(7), pages 1-19, June.
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