DECISION ANALYSIS FOR SUPPLIER IN TWO-ECHELON SUPPLY CHAIN WITH DISCRETE DEMAND VIA DYNAMIC GAME

This paper analyzes noncooperative dynamic game behavior in a two-echelon supply chain composed of one supplier and one retailer. The aim is to give supplier reasonable suggestions on decision making of marketing strategy. The challenge of dealing with this problem is the discreteness of demand. The main contributions of this paper are twofold: one is to address the necessary conditions in which supplier can choose quantity discount policy as marketing strategy; the second is to provide the solving methods of the equilibrium strategy and discount rate under quantity discount policy. Two types of quantity discount marketing strategies are considered. It is concluded that the strategy sets of production and procurement are independent of discount rate via analyzing the optimality properties. Numerical tests illustrate that incremental quantity discount policy is more widely considered than all-unit quantity discount policy, and whether the quantity discount policy can be chosen as the marketing strategy not only relates to supplier's own cost structure but also retailer's cost structure.