The ‘Price’ of Competition in Supply Chains when Pricing is Endogenous

April 27, 2010
Georgia Perakis, Sloan School of Management; joint work with Wei Sun and Justin Teo.

In this work, we investigate a two-tier supply chain in which there is a supplier who proposes a simple price-only contract to several sellers who are competing in the market through selling differentiated products to customers. The goal in this work is to determine how i) vertical competition (i.e. among the supplier and the sellers) and horizontal competition (i.e. among the sellers) as well as ii) endogenous pricing decisions from the sellers, affect the supply chain in a market where products are not homogeneous but rather differentiated. In particular, our goal is to determine how prices, order quantities and chain-wide profits get affected due to lack of coordination in the supply chain.

Please watch video below.