A collaborative model for coordination of monopolistic manufacturer's promotional efforts and competing duopolistic retailers' trade credits

Abstract In recent years, competition among enterprises has been significantly increased. Trade credit and promotional effort are two important tools that have been extensively used for increasing competitive advantage. In today's business environment, retailers compete each other on new factors such as the length of credit period offered to end customers. In this paper, the performance of a supply chain (SC) consisting of a monopolistic manufacturer and two competing retailers has been analyzed under a promotional-effort credit-period dependent demand. The promotional efforts made by the manufacturer and the trade credits offered by competing retailers stimulate the market demand. The investigated SC is modeled under the decentralized, centralized and coordinated decision-making structures. In the decentralized model, three game structures are proposed to reflect the retailers' behaviors according to their market dominance: (1) retailers' Cournot behavior, (2) retailers' Collusion behavior, and (3) retailers' Stackelberg behavior. In the centralized model, the optimal decisions on promotional efforts and credit periods are determined to maximize the profits of the entire channel. However, the results indicate that the centralized solution will not necessarily be acceptable to all members as it does not consider the individual profit of each SC member. To remedy shortcomings of the centralized model and coordinate the channel, a novel collaborative model is proposed in order to not only increase the whole SC profits, but also guarantee participation of all SC members. Finally, a numerical example along with a comprehensive sensitivity analysis is carried out to compare the performance of the proposed models.