Joint optimal decisions on pricing and warranty policy of duopoly supply chain with one common retailer

Abstract

Early researches related to the interaction between manufactures for complementary products, mainly considered price as only the dimension of competition. With the increasing competition in capturing the market share, manufactures cannot compete by only lowering prices. In this paper, we assume that besides the price, the manufactures choose warranty as the competitive strategy of two different but substitutable products in a duopoly supply chain with one common retailer. Furthermore, two cases are considered (i) only one manufacturer adopts warranty policy as a competitive strategy against the other, (ii) both manufacturers offer warranty on their product, to study under which situation offering a warranty becomes more profitable for a manufacturer while the other competitive manufacturer has already adopted warranty policy. The profit functions of the manufacturers and the retailer are then maximized under manufacturers' cooperative and non-cooperative strategies. We then compare the scenarios under different decision strategies numerically, which gives some insights on changes of key parameters to help the decision makers to capture the market.