Abstract
In this paper, we develop the price competition model of two supply chains, in which each supply chain includes one core manufacturer and one retailer, respectively. The manufacturer in each supply chain sells products to the retailer through a commonly-used wholesale price contract. Each manufacturer has two options to implement the wholesale price contract: playing the Stackelberg game with the retailer and playing the bargaining game with the retailer. Based on the manufacturer’s two alternative performing modes in each supply chain, we consider four combined performing modes of two competitive supply chains in the model. By comparing equilibrium results, we find that when both manufacturers choose to bargain with retailers, the sales volume increases and the sales price decreases. Moreover, the manufacturers’ mode option is affected by bargaining power, product quality level, and the cost of improving product quality. Specifically, when both bargaining power and the cost of improving product quality are relatively small, both manufacturers choose to play Stackelberg game with retailers. When manufacturers’ bargaining power is sufficiently large, regardless of the cost of improving product quality, both manufacturers choose to bargain with retailers. Surprisingly, when the manufacturer chooses to bargain the wholesale price with the retailer, higher product quality is not always beneficial to the retailer because the retailer may have to share part of the cost of the manufacturer.
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Acknowledgments
This work was supported by the National Natural Science Foundation of China under Grant Nos.72071082 and 71971088, and Guangdong Social Science Planning Project under Grant No. GD19CGL28. The authors are grateful to the editor-in-chief, the associate editor, and the anonymous referees for their constructive comments.
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Yongwu Zhou is a professor at the School of Business Administration of South China University of Technology. His research interesting includes logistics and supply chain management, inventory control and management, supply chain finance, data-driven operation management, sharing-platform operation management, etc.. His papers have appeared in the peer-reviewed journals such as IIES Transactions, European Journal of Operational Research, Omega, etc..
Jie Liu is a master student in management science and engineering of the School of Business Administration of South China University of Technology, mainly engaged in logistics and supply chain management. She has won the first-class scholarship for outstanding graduate students, the first-class award of the first national Yunfeng Cup reverse logistics design competition, and the seventh national college student e-commerce “Innovation, Creativity and Entrepreneurship” Competition, Second Prize of Guangdong Province.
Xiaoli Wu is currently an associate professor at the School of Business Administration, South China University of Technology. She received her Doctor of operation management degree from Hong Kong University of Science & Technology. Her papers appear in a range of journals including Operations Research, Annals of Operation Research, and Computers & Industrial Engineering.
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Zhou, Y., Liu, J. & Wu, X. How to Implement the Wholesale Price Contract: Considering Competition between Supply Chains. J. Syst. Sci. Syst. Eng. 31, 150–173 (2022). https://doi.org/10.1007/s11518-022-5522-z
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DOI: https://doi.org/10.1007/s11518-022-5522-z