On the performance of push and pull models with the price-sensitive demand

In this paper we study the push model and pull model of supply chain with a price-sensitive demand, in which a supplier sells a single product to an independent retailer facing stochastic demand while the retailer price is endogenously determined by the retailer, and compare the performance of supply chain between these two different models. We prove that for the multiplicative form of end-customer demand, at optimality, the wholesale price, order quantity and the retail price in pull model are greater than in push model, respectively. We further demonstrate that there is an interesting contrast: the supplier obtains greater profit in pull models than in push model, but the retailer obtains less profit in push model than in push model.