Abstract
This paper discusses a problem in which decentralized supply chains enter the market simultaneously with no existing rival chains, shape the supply chains’ networks, and set wholesale and retail prices in a noncooperative manner. All the chains produce either identical or highly substitutable products. Customer demand is elastic and price-dependent. A three-step algorithm is proposed to solve this problem. Step one considers the supply chains’ potential network structures. Step two is based on a finite-dimensional variational inequality formulation and is solved by a modified projection method to determine equilibrium prices. Step three selects the equilibrium locations to shape the chains’ equilibrium network structure with the help of the Wilson algorithm. Finally, this approach is applied to a real-world scenario, and the results are discussed. Moreover, sensitivity analyses are conducted.
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