Contract choice game of supply chain competition at both manufacturer and retailer levels

This paper investigates the problem of contract choice game of two supply chains, which compete at both manufacturer and retailer levels. The two manufacturers, as Stackelberg leaders, produce competitive products and distribute through two common retailers or exclusive retailers, and can choose either wholesale price or quantity discount contracts. We present and compare the results of two different types of contracts under different scenarios, to explore in depth the effect of supply chain structure and competition at both manufacturer and retailer levels on the profits and contract choices of two supply chains. We find that under the setting of common retailers, when the competition at manufacturer level exceeds a certain value, the equilibrium contract of the manufacturers would shift from quantity discount to wholesale price. In contrast, in the case with exclusive retailers, the quantity discount contract is the dominant strategy and the unique Nash equilibrium of contract choice game regardless of the competitive intensity at both manufacturer and retailer levels.