PMG Contract Pricing Decision in Dual-channel Supply Chain under Different Power Structures
In this paper,we discussed the influence of product substitutability and relative channel position on the attitude of supply chain members towards a profit-margin-guarantee(PMG)contract under different power structures,and paid special attention to three game situations with asymmetric relative channel position,namely manufacturer Stackelberg(MS),vertical Nash(VN)and retailer Stackelberg(RS).These different game scenarios reveal the supply chain members'preference for leader position and their attitude towards the PMG contract,and also involve issues such as maximum consumer benefits,etc.The research results show that a dominating manufacturer is most benefited by not entering into the PMG contract.However,in some specific cases,when enough power is vested to the manufacturer,it may be ben-eficial for the retailer to enter into the PMG contract.This usually occurs in a highly competitive market en-vironment where consumers are price sensitive.Under such circumstances,the retailer can secure a certain profit margin through the PMG contract and is thus incentivized to actively promote and sell products.When the retailer and the manufacturer are in equal power position,entering into the PMG contract will lead to reduction in the retail price of the product,which reflects the balance of interests between the two parties in contract negotiation.However,the manufacturer and the retailer may have opposing attitudes to-wards the PMG contract.The manufacturer may be concerned about profit reduction,while the retailer may want to reduce market risk by making profits.Such difference stems in part from the dual effects of fixed profit margin and channel asymmetry.In addition,the research results show that preferences of the manufacturer and the retailer for leader posi-tion are influenced by product substitutability and channel asymmetry.If the product is highly substitutable,the retailer may be inclined to choose more favorable contract terms,thereby strengthening its market posi-tion.When the fixed profit margin is too high,both the manufacturer and the retailer may take a neutral atti-tude towards the leader position,raising the complexity of contract negotiation.These conclusions provide important reference and guidance for the decision-making of dual-channel supply chain members.By deeply understanding the impact of different power structures and product substi-tutability on contract selection,supply chain members can more effectively formulate strategies to maximize benefits and enhance consumer benefits.This not only helps optimize the overall efficiency of the supply chain,but also provides enterprises with more flexible coping strategies in a highly competitive market envi-ronment.
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