Supply chain disruption management and evolutionarily stable strategies of retailers in the quantity-setting duopoly situation with homogeneous goods

Abstract

This paper develops an indirect evolutionary game model with two-vertically integrated channels to study evolutionarily stable strategies (ESS) of retailers in the quantity-setting duopoly situation with homogeneous goods and analyzes the effects of the demand and raw material supply disruptions on the retailers’ strategies. Every channel consists of one manufacturer and many (a sufficiently large number of) retailers that sell products in different markets by adopting two pure marketing strategies: profit maximization and revenue maximization. We find that revenue maximization strategy may prevail and profit maximization strategy may become extinct. Two strategies may coexist, i.e., all retailers in one channel will choose profit maximization strategy and all retailers in the other will choose revenue maximization strategy. The ESS of retailers depends on the relative size of the market scale and unit cost. The supply chain disruptions affect the ESS of retailers. We also introduce a recovery model of the supply chain under disruptions and illustrate the effect of disruptions on the ESS and on the average profits of channels in a market using a numerical simulation.