Abstract
We examine the effect of firms’ market powers on the optimal strategies and profits of partners and make comparisons under different structures in a dual‐channel supply chain, where the manufacturer provide a value‐added service to differentiate the product for the customer to some extent. We consider centralised decision and decentralised decision cases where supply chain partners have different market power structures, including the Manufacturer‐Stackelberg, Retailer‐Stackelberg and Nash Game. We find that the direct sale price and added value are unchanged under different power structures. However, dominating power structures always lead to inefficiency for the whole dual‐channel supply chain. The more power one of the channel partners has, the larger profit loss the whole supply chain will suffer.
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