Pricing Game under Imbalanced Power Structure

The issue of channel power in supply chain has recently received considerable attention in literature. Several different channel interactions between manufacturers and retailers and the relative power of supply chain members have been examined. Most of these practices considered all manufacturers to be Stackelberg leaders or followers over/under retailers. In this paper we add to the existing literature by proposing a model for analyzing the effect of asymmetric power within the supplier group on channel performance. We study and derive the unique #ash Equilibrium solutions for two noncooperative games in a two-supplier-one-retailer power-imbalanced supply chain with random price dependent demand in which suppliers offer substitutable products to a common retailer under periodic review policy. It is demonstrated that in imbalanced power case, the common retailer makes more profit than the two manufacturers do and also the profit among suppliers, is divided uneven. That is, the more powerful agent receives larger percentage share of selling his products. The whole supply chain converges to the integrated channel as the substitution degree of products increases.