Pricing in Two Competing Supply Chains Based on Market Power and Market Size under Centralized and Decentralized Structures

Abstract

In this paper, we considered the competition between two multi-echelon supply chains with identical structures on price under two market power structures. For this purpose, we developed two different scenarios. In the first scenario, both supply chains decided simultaneously (the Nash game). In the second scenario, due to the imbalance of power between the two supply chains, we adopted the Stackelberg game in the model. Price equilibrium is obviously obtained through the Game Theory. The paper investigated the effects of different relations between the market sizes of supply chains and the supply chain structures on price and profit along with the analysis of power in the market. Based on these assumptions, it was found that the supply chains did not always involve the second-mover advantage in the price Stackelberg game. Furthermore, having the centralized structure, both of the supply chains benefited from presence of a leader in the market for different combinations of market size. Finally, we presented significant managerial insights for the market with two competitive supply chains when the structures were similar. Moreover, the relationship between price and profit was analyzed given the size of the market in different scenarios rather than through provision of numerical examples.