An analysis of wholesale price contracts in a three-stage supply chain

This paper studies the wholesale price contacts in a three-stage supply chain. This model allows the retailer and the distributor to maximize their profits, however, contrary to popular belief (based on the wholesale price contacts in a buyer-supplier system) we show that the manufacturer does not always find a joint optimal sales quantity to achieve "double. marginalization", especially, when we assign the bargaining power to other supply chain members, a joint optimal sales quantity is difficult to be found. It has proven that the demand distribution characteristics are the critical parameters for the manufacturer to achieve "double marginalization.".