Pricing Strategy For Competitive Supply Chains Using Game Theory

Abstract

This paper aims to find the best pricing strategy for two competitive supply chains using different distribution channels. One manufacturer uses external traditional retail channel while the other uses own online channel to sell highly substitutable products. The objective is to maximize profits of two manufacturers and the retailer placed under competitive interactions. Linear demand function and game theory are applied to simulate cooperation and competitiveness between parties. A model of multi-objective optimization is constructed to solve the problem using IBM ILOG CPLEX Optimization Studio software.