Impact of Product Competition and Power Structure on Pricing Strategy in Dualchannel Supply Chain

Shujuan Li

School of Economics and Management Wuhan Sports University Wuhan, China

Abstract: The pricing strategy under the interaction of competition and power structure in dual-channel supply chain is studied. A two-level dual-channel supply chain model was constructed, in which the manufacturer has a direct channel to sell products directly to customers. Optimal pricing strategies under three different power structures (Nash equilibrium, Manufacturer Stackelberg, Retailer Stackelberg) in non-competition situation were discussed. Product pricing policies in competition environment were analyzed. Results showed that: compared to Nash equilibrium making decision simultaneously, the leader of Stackelberg game takes the advantage of first-move and makes more profits than in Nash equilibrium; as market competition intensifies, the optimal prices will gradually decrease in competition environment. Numerical examples are given to compare the strategies in non-competition and competition situation and demonstrate the effectiveness of relevant conclusions.

Keywords: dual-channel; supply chain; Stackelberg game; power structure