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Game-theoretical Models of a Two-echelon Supply Chain Involving Two Substitutable Products

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Abstract

This paper considers tripartite pricing issues in a two-echelon supply chain involving duopolistic manufacturers and a single retailer. Firstly, a tripartite competitive model is conducted, in which both a Stackelberg game and a Bertrand game occur simultaneously. It is shown that the manufacturer who possesses a higher sales quantity gains more profits than the other one. Secondly, a definition of optimal vertical pricing alliance is proposed when cooperation exists between the retailer and some manufacturer. We conduct two-player games when partial cooperation exists among the three participants. It is demonstrated that the total profit of the alliance is higher than the sum profit of the corresponding two participants in the tripartite competition model, and meanwhile the profit of the manufacturer who is not in the alliance suffers a loss. Further, a criterion is given to judge which manufacturer the retailer will choose to cooperate in order to maximize the total increased profits. From the perspective of game theory, we examine the stability of the vertical alliance with considering the dominance of the retailer. Finally, a numerical illustration is designed to examine the judging criteria of which manufacturer is the member of the optimal alliance under different potential market demands.

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Acknowledgments

We would like to thank the editors and reviewers for their constructive suggestions and corrections to enhance the clarity of the present article.

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Authors and Affiliations

  1. School of Management and Economics, Beijing Institute of Technology, Beijing, China

    Zhenkai Lou & Fujun Hou

  2. School of Economics and Management, Xi’an University of Posts and Telecommunications, Xi’an, China

    Xuming Lou

  3. School of Logistics, Beijing Wuzi University, Beijing, China

    Tingting Ma

Authors
  1. Zhenkai Lou
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  2. Fujun Hou
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  3. Xuming Lou
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  4. Tingting Ma
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Corresponding author

Correspondence to Fujun Hou.

Additional information

Zhenkai Lou is a doctoral candidate of management science in School of Management and Economics, Beijing Institute of Technology, China. His research interests include decision theory and supply chain management.

Fujun Hou received his Ph.D. degree in School of Management and Economics from Beijing Institute of Technology, China. He is currently a professor in Beijing Institute of Technology. His research interests include group decision and supply chain management. He has published more than 30 papers in technical journals.

Xuming Lou received his Ph.D. degree in the School of Management, Xi’an Jiaotong University, China. He is currently a professor in School of Economics and Management, Xi’an University of Posts and Telecommunications, China. His research interests include decision theory and enterprise operation management.

Tingting Ma received her Ph.D. degree in School of Management and Economics, Beijing Institute of Technology, China. She is currently an associate professor in Beijing Wuzi University. Her research interests include technological innovation and opportunity identification.

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Lou, Z., Hou, F., Lou, X. et al. Game-theoretical Models of a Two-echelon Supply Chain Involving Two Substitutable Products. J. Syst. Sci. Syst. Eng. 30, 307–320 (2021). https://doi.org/10.1007/s11518-021-5483-7

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  • DOI: https://doi.org/10.1007/s11518-021-5483-7

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