Effects of channel power structures on pricing and service provision decisions in a supply chain: A perspective of demand disruptions

Abstract

This paper investigates the service investment and pricing decisions under different power structures when there exist demand disruptions. We consider a supply chain consisting of a single manufacturer and a single retailer, and establish a game theory model under three typical channel power structures: Manufacturer Stackelberg game, Retailer Stackelberg game, and Nash game. We find that when the demand is disrupted, whether it is a centralized system or decentralized system with different power structures, the service level and production quantity are robust when the demand disruption is sufficiently small, and the wholesale price is also robust under certain circumstance. The comparison results of equilibrium pricing and service level under different power structures are affected by the supply chain power and service cost coefficient no matter who provides the demand-enhancing services. Moreover, it can be found that the power structure most suitable for the manufacturer or the retailer is not invariable and the results are related to the change of some parameters.