Abstract
The present paper examines the manufacturer’s operational decisions, e.g., wholesale price and product sustainability level, the retailer’s operational decision, e.g., retail margin, and supply chain efficiency under three supply chain power structures: manufacturer Stackelberg, Nash and retailer Stackelberg. As a benchmark, we first obtain the equlibrium price and product sustainability level in a vertically integrated supply chain. Our analysis provides some interesting findings in a decentralized supply chain: (i) a dominant manufacturer (retailer) always benefits from its power; (ii) the entire supply chain earns the most profit from the Nash game, and the least from the retailer Stackelberg game, respectively; (iii) as the power shifts from the manufacturer to the retailer, product sustainability and retail price increase; (iv) dominant manufacturer does not necessarily imply low wholesale price that would benefit the retailer. Managerial insights are provided for the manufacturer and the retailer, respectively.
Highlights
During the past few decades, a large and increasing number of manufacturers are gradually realizing the potential economical, social and environmental benefits from the research and development of sustainable products [1]
The purpose of this paper is to investigate the effects of power structure on managerial decision-making including wholesale price, sustainability and retail margin, and answers the following research questions:
The entire supply chain earns the most profit from the Nash game, and the least from the retailer Stackelberg game, respectively
Summary
During the past few decades, a large and increasing number of manufacturers are gradually realizing the potential economical, social and environmental benefits from the research and development of sustainable products [1]. Given the fact that a product is distributed from the manufacturer to the retailer, and to the consumers, a critical strategy on supply chain management is the wider adoption and development of sustainability practices [11]. In this study we develop a game-theory framework to model power in a two-echelon supply chain consisting of an upstream manufacturer and a downstream retailer. The decision variables of the manufacturer are wholesale price and product sustainability level, while the retailer makes decision on retail margin. The purpose of this paper is to investigate the effects of power structure on managerial decision-making including wholesale price, sustainability and retail margin, and answers the following research questions:. How does power structure affect the manufacturer’s decisions about wholesale price and product sustainability?.
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