Decentralized Supply Chains with Competing Retailers Under Demand Uncertainty

Abstract

In this paper, we investigate the equilibrium behavior of decentralized supply chains with competing retailers under demand uncertainty. We also design contractual arrangements between the parties that allow the decentralized chain to perform as well as a centralized one. We address these questions in the context of two-echelon supply chains with a single supplier servicing a network of (competing) retailers, considering the following general model: Retailers face random demands, the distribution of which may depend only on its own retail price (noncompeting retailers) or on its own price as well as those of the other retailers (competing retailers), according to general stochastic demand functions.