Coordinating Retailers with Price and Service Competition

Coordination issue is investigated in a supply chain with competing agents. The supply chain consists of a distribution system in which a supplier provides a common product to N independent retailers. These retailers face their respective stochastic demand markets but compete with each other through price and service operation. The retail competition model and coordination model are established, and the interactive dynamics among retailers is characterized, especially the existence and uniqueness of Nash Equilibrium are demonstrated when considering linear demand model. Finally, channel coordination is addressed in the studied supply chain with wholesale contracts. It is shown that these contracts can achieve perfect coordination only when the demand models satisfy some very limiting conditions.