Game theoretical models of two-level supply chain with a strategic consumer

In this paper, we look at several game theoretical models of a supplier-retailer supply chain involving a strategic consumer. The interaction between the players will be investigated using a leader-follower type game known as a Stackelberg game. Two scenarios are considered: 1) no coalition is formed among the players and they act non-cooperatively against each others; 2) a selection of two players form a coalition against the third player. Under the first scenario, we let each player takes turn as leader, and in the second scenario, the coalition takes the leadership position in the game. The effects due to leadership and coalition formation on each player’s strategy and profit, especially consumer’s welfare, will be investigated and numerical examples provided.