Equilibrium structures of two supply chains with price and displayed-quantity competition

This paper studies the equilibrium structure of two competing supply chains, each of which consists of one manufacturer and one retailer who faces the demand influenced by price and displayed quantity. Each chain has two structure options: integration or decentralization. Under linear demand, we present the optimal pricing/displayed quantity of all members in the two chains under possible structures: two integrated chains (II), two decentralized chains (DD), and one integrated chain and one decentralized chain (ID or DI). We then analyse the impact of the intensities of price and displayed-quantity competition on the equilibrium structure of two supply chains. The results show that both price and displayed-quantity competition intensities influence significantly the equilibrium structure. Moreover, under certain specific conditions, both price and displayed-quantity competition can have the two chains fall into the prisoner’s dilemma and play a game of chicken as well.