Title: A Stackelberg game for ordering and pricing policies in a decentralised dual-channel supply chain

Authors: Fariba Soleimani; Mohammadali Pirayesh; Farzad Dehghanian

Addresses: Industrial Engineering Department, Faculty of Engineering, Ferdowsi University of Mashhad, Iran ' Industrial Engineering Department, Faculty of Engineering, Ferdowsi University of Mashhad, Iran ' Industrial Engineering Department, Faculty of Engineering, Ferdowsi University of Mashhad, Iran

Abstract: This study explores ordering and pricing policies in a decentralised two-echelon dual-channel supply chain including one manufacturer and one retailer. The manufacturer produces in a lot to supply an integer number of the retailer's order and also to meet the demand of direct sales channel. It is assumed that the manufacturer has more market power than the retailer and he is the leader of a Stackelberg game. The concavity of the manufacturer profit function is proved, which based on it, a solution procedure is proposed by using game theory and Nelder-Mead algorithm to find the optimal pricing and ordering policies for the manufacturer and the retailer. The numerical example is provided to investigate the features of the proposed model. It is shown that the inventory holding costs, setup costs and ordering costs have negligible effects on optimal prices and also by increasing the price elasticity of the demand of one channel to the price of the other channel, both members can achieve more profit.

Keywords: inventory control; dual-channel supply chain; pricing; game theory; Stackelberg game.

DOI: 10.1504/IJPM.2022.119842

International Journal of Procurement Management, 2022 Vol.15 No.1, pp.93 - 112

Received: 31 Dec 2019
Accepted: 13 Aug 2020
Published online: 22 Dec 2021 *

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