Optimal Pricing of a Two-Echelon Distribution System Considering 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-Cournot, Collusion and Stackelberg. The sensitivity of the retail quantity to the wholesale price of the manufacturer and the sale prices of the retailers is fully considered. A novel retailers´ profit model is developed. Then a simple algorithm is provided to find the optimal sale prices, associated retail quantities, and the optimal wholesale prices 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.