Two Stage Competition and Supply Chain Coordination in a Distribution System

Competition and coordination issues are jointly addressed in a supply chain consisting of a distribution system in which a supplier provides a common product to N indepen-dent retailers. These retailers face their individual stochastic demand markets, but they compete with each other through price and service two stage operation. The retail competition model and coordination model are respectively established. Specifically, the interactive dynamics among retailers is characterized, including the existence and uniqueness of Nash Equilibria in service and price games demonstrated in the linear demand settings. Finally, channel coordination is presented in the studied supply chain with wholesale contracts. It indicates that these contracts can achieve perfect coordination only when the demand models satisfy some limiting conditions.