Channel coordination on supply chain with unbalanced bargaining power structure by exogenous-force impact: China market background

The traditional research on performance improvement of the supply chain concentrated more on the active influence of centralized-decision for supply network than preconditions and mode of its implementation, and even seldom focused on application of centralized pricing tactics for Pareto improvement on supply chain with unbalanced power structure. This paper interprets a two-echelon supply chain model comprising a single vendor and a single retailer originated from China market background comparing the revenues from independently pricing with Nash equilibrium and leader-follower pricing models with Stackelberg equilibrium respectively in a complete information background, and further proves preconditions to guarantee the successful Pareto improvement of those models under concentrated pricing. The comparison of profits between complete information and incomplete information structures indicates the existence of incentives for both sides to share information and centralized pricing. The regulation of government as an exogenous-force intervention to change the comparison of supply chain powers is employed to achieve the Pareto improvement for the chain-wide system.