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We consider strategic pricing problems in which each firm chooses between a non-cooperative (individual pricing) strategy and a cooperative (price negotiation) strategy. We first analyze a monopoly supply chain involving a supplier and a retailer, and then investigate two competing supply chains each consisting of a supplier and a retailer. We find that a proper power allocation between the supplier and the retailer can make the two firms benefit from negotiating the wholesale and retail prices. When the supplier negotiates the wholesale price, the retailerís cooperative strategy can always induce supply chain coordination in the monopoly setting, whereas the two supply chains in the duopoly setting can be possibly coordinated only when the retailers determine their retail prices individually. In both the monopoly and duopoly settings, the wholesale price negotiation is a necessary part of the communications between supply chain members. When the supply chain competition intensifies, all firms are more likely to determine their prices individually rather than to negotiate their prices.
Bibliographical noteThe authors are grateful to the Department Editor (Professor Maqbool Dada), the Associate Editor, and two anonymous reviewers for their insightful comments that helped improve this paper.
The first two authors (i.e., Femin Zhong and Zhongbao Zhou) were supported by the National Natural Science Foundation of China (Nos. 71801086, 71371067) and Hunan Provincial Natural Science Foundation of China (Nos. 2019JJ50083, 2017JJ1012). The third author (Ming-ming Leng) was supported by the Faculty Research Grant (FRG) of Lingnan University under Research Project No. DB20B2.
- generalized Nash bargaining solution
- strategic pricing
- supply chain