Coordination and competition in a common retailer channel: Wholesale price versus revenue-sharing mechanisms

In this paper, we study a supply chain comprising two competing manufacturers who sell their products through a common retailer. The retailer sells two competing brands with varying degrees of product substitutability. Under a linear stochastic demand, which is dependent on the retailer's price of its own brand as well as on the competing brand's retail price, we present a newsvendor model to determine the price and the quantity and study non‐cooperative games among channel members. We establish a Stackelberg game where the common retailer acts as the Stackelberg leader. Later, we consider the case where manufacturers act as Stackelberg leaders. The basic model is developed based on wholesale price contract. We present some analytical results and establish the equilibrium of the system. We compare our equilibrium solution with that of the integrated system where a manufacturer produces two brands of product and sells them to the customer through its own retail channel. To enable supply chain coordination, we consider a revenue sharing contract. Finally, a numerical analysis is conducted to illustrate the impact of model parameters on the optimal decision variables.