Assuming the two retailers decide whether to acquire information to segment consumers and price them differently, we investigate the problem of information acquisition and third-degree price discrimination in the supply chain composed of one common manufacturer and duopoly retailers. We explore how the supply chain members’ pricing decisions are affected by the fraction of high price-sensitivity consumers and the consumers’ difference in price sensitivity. Analytical results show that the manufacturer’s wholesale price increases with the fraction of high price-sensitivity consumers and decreases with the consumers’ difference in price sensitivity. Moreover, if a retailer chooses to acquire information and price discriminate, the retail prices for two types of consumers increase with the fraction of high price-sensitivity consumers. However, the retail price for consumers with high (low) price sensitivity decreases (increases) with the consumers’ difference in terms of price sensitivity. By comparing the results among different information acquisition and price discrimination decisions, we find that there exist two possible equilibrium decisions for both retailers: both retailers acquire information and price discriminate and no retailer acquires information and each charges a uniform price for all consumers. The strategy which dominates depends on the fraction of high price-sensitivity consumers and the consumers’ difference in price sensitivity. However, compared with no retailer acquiring information, the manufacturer is better off when two retailers acquire information. Consequently, the manufacturer designs a fixed fee contract to stimulate retailers to price discriminate and to achieve a win-win situation for them finally.

PurposeThe authors investigate the manufacturer's choice of discount schemes in a supply chain with competing retailers.Design/methodology/approachUsing a game-theoretic model, the authors build two discount frameworks and compare and analyze the effects of different discount schemes on the performance of supply chain members.FindingsThe authors find that the retail price (market demand) in the quantity discount scheme is always higher (lower) than that in the market share discount scheme. The authors also find that the retailers' preference for discount schemes is antithetical to the manufacturer's preference in most cases. However, under certain conditions, there will be a win-win situation where Pareto-optimization occurs between the manufacturer and retailers when they choose the same discount scheme.Research limitations/implicationsOn the one hand, the authors assume that the two retailers are symmetrical in market size and operation efficiency. It would be interesting to study the effect of different discount schemes on retailers when the retailers have different market sizes or operating efficiency. On the other hand, the authors study the manufacturer's choice of discount schemes in a supply chain with one common manufacturer and two competing retailers. However, in practice, there exist other supply chain structures. Future research can examine the problem of choices of discount schemes in other different supply chain structures.Practical implicationsThis paper help retailers and manufacturers to choose the best discount schemes.Social implicationsThis paper suggests that a high discount scale is not always beneficial (detrimental) to retailers (the manufacture).Originality/valueThe authors build two discount schemes (the quantity and the market share) in a supply chain consisting of one manufacturer and two retailers, and the authors focus on the effects of different discount schemes on the competition between two retailers. By comparing the two discount schemes, the authors study which discount scheme is the better choice for the manufacturer when facing competing retailers.