Pricing strategy of competing retailers in a two layer supply chain under nonlinear stochastic demand

Abstract

This paper develops mechanisms to deal the strategic issue that arises in a two-echelon closed-loop supply chain comprising of one manufacturer and two competing retailers. The chain works under stochastic nonlinear demand. Here the manufacturer works as the supplier and the retailers compete with each other on the basis of their retail price. The prime objective is to investigate a news-vendor model to govern the optimal order quantity. A buyback contract between the manufacturer and retailer has been considered and scenario of shortage has also been contemplated. The profit functions of manufacturer and two retailers are analysed following centralised approach. A numerical example is given to illustrate the theoretical results. Computational results show that it is always beneficial in integrated system for the members of the chain.