Quality-Price Decision In Two-stage Supply Chain

With the rapid development of science technology and the productive forces, the market structure shifted from a seller's to buyer's market, and competition among enterprises has been the most powerful weapon of the market competition. The product quality reflects the customer needs and meets customer demand, which means that the product quality also determines whether the firm can survival and development in the fierce market competition. So besides the price decision, other marketing and operational decisions,including product quality may affect the supply chain management.This paper studies a joint product price and quality decision problem in a two-stage supply chain in which there are one manufacturer and one retailer. The manufacturer produces a product and sells it by the retailer. We assume that the manufacturer determines the quality of the product firstly, and then they determine the wholesale price and the retail price of the product respectively.Considering that quality and price influence the consumer's demand, we analyzed the quality and price level equilibriums of the supply chain at certain and uncertain environment, with static game, dynamic game of complete information and coordinate situation. We find that the optimal profit in the centralized is not less than in the decentralized case. Then, we design a contract of quality cost allocation model and the conclusion indicates that a contract can link manufacture and retailer together to share risks, and both of them may get more profits than the noncooperative game.