Decision Making in Two Echelon Supply Chain under Stackelberg and Cornot Structures

This article considers pricing and ordering decisions in the two echelonsupply chain consisting of one manufacturer and two rival retailers under stochastic demand. A Stackelberg structure is considered between two echelons of supply chain that manufacturer acts as a leader, and retailers act as followers making decisions about pricing and ordering. Also, in echelon of retailers, optimal pricing policy and profits of chain members are calculated and, in special case that retailers are faced with similar market demand, Stackelberg structure is compared with Cornot structure. This research shows that among two competitive scenarios, Cornot structure causes that retailers set lower sale price as compared with Stackelberg structure and consequently retailers earn less profit in Cornot structure. Also in both competitive structures, manufacturer’s profit is higher than double of total retailers’ profit.