Pricing policy and coordination for a two-layer supply chain of duopolistic retailers and socially responsible manufacturer

Abstract

This paper explores channel coordination and profit distribution in a two-layer socially responsible supply chain that consists of a manufacturer and two competitive retailers. In manufacturer-Stackelberg game setting, the manufacturer exhibits corporate social responsibility and the retailers play Cournot and Collusion games. Besides comparing the optimal decisions of the retailers two game behaviours, the paper analyses the effects of social responsibility on the optimal decisions. It is found that two-part tariff contract resolves channel conflict and provides win–win outcome for a specific range of the franchise fee and it is always possible to find a particular profit split using Nash bargaining product. With increasing social responsibility of the manufacturer, the coordinated wholesale prices of the manufacturer may be both decreasing or ‘U’ shaped and decreasing when the market potentials of the retailers are almost the same or significantly different. Also, at least one coordinated wholesale price is less than the manufacturer's marginal cost. The proposed model is illustrated by a numerical example.

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