Abstract
In this paper, we discuss how a manufacturer interacts with his multiple competing retailers to optimize their individual net profits through coordinating pricing and inventory decisions in a two-echelon supply chain. The manufacturer purchases raw materials outside to produce substitutable products to different retailers. The manufacturer determines his optimal wholesale prices for different retailers, setup time interval for the products and replenishment cycle for raw materials to maximize his profit. For each retailer, he considers optimal retail prices and replenishment policies to maximize his profit. The problem is modeled as a dynamic non-cooperative game in which all the competing retailers formulate a subgame and as a sector play the whole game with the manufacturer. Analytical method and solution algorithm are developed to determine the Nash equilibrium of this game. A numerical study is conducted to examine the influence of market and production related parameters on decisions and profits of the supply chain and its constituent members.
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