Analysis of product return rate and price competition in two supply chains

Yanyan Zheng, Tong Shu (), Shouyang Wang, Shou Chen, Kin Keung Lai and Lu Gan
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Yanyan Zheng: Hunan University
Tong Shu: Hunan University
Shouyang Wang: Hunan University
Shou Chen: Hunan University
Kin Keung Lai: Shaanxi Normal University
Lu Gan: Hunan University

Operational Research, 2018, vol. 18, issue 2, No 9, 469-496

Abstract: Abstract This article compares a normal and a reverse supply chain in the Betrand Competition. Each supply chain consists of a retailer and an exclusive supplier with stable partnership. The two chains compete with each other in three competition structures: the Centralized Competition Game, the Hybrid Competition Game (including two cases), and the Decentralized Competition Game. In different competition structures, we examine how the degree of competition intensity between the two chains and product return rate of the reverse chain influence the equilibrium decision of market price, profits of two chains and the choice of centralization. The article differs from the study of the traditional supply chain model as follows. Firstly, we analyze the normal and the reverse chain related to the same product in the Betrand competition. Secondly, the data show that the market price decreases with the rising of the product return rate and the falling of the competition intensity. Thirdly, it is found that the total profit of the normal chain decreases with the rising of the product return rate, while the total profit of the reverse chain increases with rising of the product return rate. Profits of two chains increase with the rise of the competition intensity. Finally, this article shows that centralization is an optimal strategy for one chain whereas centralization may be the best for the other chain.

Keywords: Supply chains; Betrand competition; Competition intensity; Product return rate; Competition structures; Optimal strategy (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s12351-016-0273-6

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