Research on Supply Chain Coordination for substitutable products in competitive models

This paper studies four substitutable products in a two level supply chain which consists of two suppliers and two manufacturers. We develop two competitive models that decisions are made on the decentralized and centralized decisions respectively. Then we get the optimal pricing for four products in each condition. Through detail numerical analyses, we discuss the price, product demand and the benefit of supply chain under the influences of the price sensitive coefficient, auxiliary material cost and combination of price sensitive coefficient and production cost. Besides that, we also discuss the impact of price adjustment speed parameter on the strategy of pricing for products. We find that the optimal material providing strategies for manufacturers are changing with the value of price sensitive coefficient in the decentralized and centralized decisions. And the competition among substitutable products can slow down the effect of production cost on the benefit of supply chain. We also conclude that the supply chain with coordination mechanism can be more stable under the repeated game between manufacturers. Key–Words: substitutable product, supply chain coordination, price sensitive coefficient, repeated game, chaos