Supply Risk And Duopoly Competition Strategies Under Different Pricing

In this paper,we study the impact of competition on the interplay between the two ways of mitigating supply uncertainty,i.e.,diversification and pricing.In our model,there are two competitive firms,and each firm could order from two suppliers,i.e.,the low-cost supplier but highly unreliable and the high-cost reliable supplier.Firstly,we present the optimal ordering strategies of the two competing firms under commitment and response pricing strategies.Whether the two firms choose to diversify depends on the relationship between the effective cost and the cost of the supplier's products.Secondly,when there is only one unreliable supplier,both companies order more under response pricing than under commitment pricing.This indicates that under response pricing,response pricing is better than committed pricing in matching the supplier's total deliveries to market demand.Thirdly,it is found that the intensity of competition will affect the interaction of these two business strategies.Then,dual supply strategy and responsive pricing strategy are more likely to be complementary as the competition becomes more intense.With less competition,dual supply and responsive pricing are more likely to be substituted.Therefore,based on the strategy of the two symmetrical companies against the two suppliers with different reliability under different competition conditions,we propose the cost factor and supply uncertainty factor,and find that these two factors have a certain relationship with the intensity of competition.Different from the previous literature,the impact of cost factory is not necessarily greater than supply uncertainty factor.When the competition between duopoly is fierce,the supplier uncertainty factor is more important than the product cost factor.When there is little competition from duopoly,it can be said that product cost factor is more important than supplier uncertainty factor.The competition intensity between the two companies can be seen as the balance of these two factors that affect earnings.Fourthly,the numerical analysis shows that the intensity of competition will affect the selection of the quantity of products from two suppliers.When the competition between the two companies is fierce,both companies will reduce the order quantity to the unreliable supplier,increase the order quantity to the reliable supplier,and the total order quantity will also increase.When the competition intensity between the two companies is relatively small,the result is reversed.