Equilibrium Analysis of Channel Structure Strategies in Uncertain Environment

In this paper, we consider a pricing decision problem with two competing supply chains which distribute differentiated but competing products in the same market. Each chain can be vertically integrated or decentralized based on the choice of the manufacturer. The manufacturing costs, sales costs and consumer demands are characterized as uncertain variables, whose distributions are estimated by experienced experts. Meanwhile, uncertainty theory and game theory are employed to formulate the pricing decision problems. The equilibrium behaviors (how the supply chain members make their own pricing decisions on wholesale prices and retailer markups) at operational level under three possible scenarios are derived. Numerical experiments are also given to explore the impacts of the parameters’ uncertain degrees on supply chain members’ pricing decisions. The results demonstrate that the supply chain uncertain factors have great influences on equilibrium prices. In addition, we also evaluate the effects of competing intensity (substitutability) of the two products on the strategy behaviors, vertically integrated channel strategy versus decentralized strategy, of the manufacturers. It is found that the manufacturers are better off to distribute their products through a decentralized channel rather than an integrated one when the substitutability is greater than some value. Besides, the uncertain factors in the supply chain might reduce the value contrast to the one in deterministic case. Some other interesting managerial highlights are also provided in this paper.