Coordination of a Risk-averse Supply Chain with Price Competition

Coordination issue is investigated in a risk-averse supply chain with competing agents. The supply chain consists of a distribution system in which a supplier provides a common product to N independent retailers. These retailers face their respective stochastic demand markets but compete with each other through sell price operation. The retail competition model and coordination model are established, and the interactive dynamics among retailers is characterized, especially the existence and uniqueness of Nash equilibrium are demonstrated. Finally, channel coordination is addressed in the studied supply chain with new contracts. It is shown that these contracts can lead to the Pareto optimal solutions and achieve perfect coordination.