Wholesale Pricing and Evolutionarily Stable Strategy in Duopoly Supply Chains with Social Responsibility

Abstract

This paper analyzes manufacturers’ wholesale price decisions and the evolutionarily stable strategies of the retailers’ marketing behavior in duopoly supply chains, where each chain consists of one manufacturer and many retailers. Each retailer chooses one of two marketing strategies: social responsibility or non-social responsibility (i.e., a firm only cares about the benefits of its shareholders). We identify the conditions under which a strategy profile is evolutionarily stable. Furthermore, we investigate the manufacturers’ wholesale prices and find the following: (i) the retailer’s social responsibility decreases the unit wholesale price; (ii) when the degree of the retailer’s social responsibility is medium, the social responsibility of the retailer in a supply chain increases the profit of the retailer’s own manufacturer and decreases the profit of the rival’s manufacturer; otherwise, it decreases the profits of the two manufacturers; and (iii) when each retailer exhibits its social responsibility moderately, a triple-win situation can be achieved.

Keywords

Evolutionarily stable strategy / replicator dynamics / social responsibility / supply chain management

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