Pricing Decision in a Two-Echelon Supply Chain with Competing Retailers Under Uncertain Environment

This paper explores a supply chain pricing competition problem in a two-echelon supply chain with one manufacturer and two competing retailers. The manufacturing costs, sales costs, and market bases are all characterized as uncertain variables whose distributions are estimated by experts’ experienced data. In consideration of channel members’ different market powers, three decentralized game models are employed to explore the equilibrium behaviors in corresponding decision circumstances. How the channel members should choose their most profitable pricing strategies in face of uncertainties is derived from these models. Numerical experiments are conducted to examine the effects of power structures and parameters’ uncertain degrees on the pricing decisions of the members. The results show that the existence of dominant powers in the supply chain will increase the sales prices and reduce the profit of the whole supply chain. It is also found that the supply chain members may benefit from higher uncertain degrees of their own costs while the other supply chain members will gain less profits. Additionally, the results demonstrate that the uncertainty of the supply chain will make end consumers pay more. Some other interesting managerial highlights are also obtained in this paper.