Distributor´s pricing policy with channel competition

In this paper, we study a distributor´s pricing policy with channel competition. Assuming a three-echelon supply chain includes a manufacturer, a distributor and a number of retailers, among which there is a dominant retailer in the region who has a larger market share. We model these issues with game theory, and find: (1) the dominant retailer has a unique optimal order policy; and that (2) the distributor has a unique optimal distributor pricing policy; and that (3) under certain conditions, the distributor can get more revenue when his distribution price is lower than the manufacturer´s direct sale price; as for the dominant retailer, ordering from distributor can get a lower price and a higher profit compare to ordering directly from the manufacturer.