Competitive pricing and ordering decisions in a multiple-channel supply chain

In this paper, we consider multiple manufacturers and a common retailer in a supply chain facing uncertain demand. Each manufacturer produces a different yet substitutable product sold through the common retailer, and a portion of the manufacturers sell their products through the direct channels in addition to the retail channel. We characterize the members equilibrium decisions of prices and quantities under the decentralized uncoordinated and centralized integrated settings, and derive the closed-form solutions to explore the impact of channel structure and parameters on the members decisions and performance. We further study a coordination mechanism for the members pricing and ordering decisions when they operate under a decentralized setting. We show that when certain profit allocation conditions are met, the decentralized system will achieve the centralized integrated overall optimal profit and each chain member will get a better profit than with the decentralized uncoordinated system. Using numerical analyses, we derive many managerial insights with respect to supply chain system parameters and structure.