Optimization of a Two-echelon Distribution System under Retailers_ Different Competitive Behaviors

This paper considers the pricing and quantity decisions of a two-echelon system consisting of one manufacturer and two retailers under their different competitive behavior-independence and Stackelberg. The uncertainty of the market demand and the sensitivity of the retail quantity to the difference of sale prices between retailers are fully considered. We also develop a novel retailers´ profit model Then we provide a simple algorithm to find the optimal sale prices and associated retail quantities under the retailers´ different competitive behavior. Finally, we simulate the system and exploit several numerical experiments to test our algorithm. The experimental results show that our algorithm can wonderfully analyze the two-echelon distribution system.