Game Theory Applications in Pricing of Related Products in a Flexible Multi-Manufacturer Multi-Retailer Supply Chain Under Demand Leakage and Competition

We develop five methods to determine optimal revenue management policies for related items in a flexible supply chain including one seller and two producer in two tiers. We assume that in each echelon manufacturers produce similar and complementary products with different unit manufacturing costs, so demand leakage may occur between the echelons. The objectives of this paper are to investigate the impacts of various market powers between the members of the chain, determine the quantity of demand leakage under optimal prices, and obtain algebraic functions to compute the overall profit of the developed flexible supply chain. According to the power structures of chain members, five policies such as MS-Stackelberg, MS-Bertrand, RS-Stackelberg, MS-Bertrand and Nash games are developed. Finally, numerical studies are presented to illustrate the applicability of the developed models and solution methods.