Contracts-Based Research on Competition Between Symmetric Products´ Manufacturers

It is common for a retailer to sell products from competing manufacturers. How then should the firms manage their contract negotiations? Different from market structures researched before, contracts serve as a tool for competition tools rather than coordinating the whole supply chain in our paper. We study our models between competing manufacturers who sell symmetric products, and a common retailer facing stochastic demand. We allow the manufacturers to compete for the retailer´s business using one of two types of contracts, a wholesale-price contract, a buyback contract. We find that some key conclusions of our settings are inconsistent in other market structures discussed before. We show that in our market structure the buyback contract forces the manufacturers to compete more aggressively than when they only offer wholesale- price contracts, and this may leave them worse off and the retailer substantially better off.