Price and Quality Competition: the Effect of Directly and Indirectly Selling Under Two Competitive Manufacturers and One Common Retailer

Document Type : Research Paper


1 Department of Industrial Engineering, K. N. Toosi University of Technology, Tehran, Iran.

2 Department of Industrial Engineering, K. N. Toosi University of Technology, Tehran, Iran



Nowadays, different important indicators besides price on product sales and durability of manufacturers on the market have been considered. This paper considers the demand, cost, competitive pricing behavior, substitutability, and quality in the proposed model under two competitive manufacturers and one standard retailer. Each competitive manufacturer can sell a product directly (D) or indirectly (I) to the customer. So, we develop three scenarios for delivering the manufacture's product to the end customer. In scenario DD, two manufacturers sell directly. However, in scenario II, they sell through the familiar retailer to the end customer (indirectly), and in scenario ID, one of the manufacturers sells directly, but the other sell indirectly. Finally, some numerical examples are given to illustrate the effectiveness of the proposed scenarios in the model. Numerical examples show that the total profit of scenario DD is less than the total profit of Scenario ID. When two manufacturers' products' substitution rate is close to one, each player's total profit in scenario II is greater than the other two scenarios.


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