Pricing and production decisions in chain-to-chain competition under production costs disruption

To solve the influence of cost disruption caused by emergency events on the whole supply chain, a Stackelberg game model consisted of two competition supply chains under production cost disruptions was researched. The pricing and ordering policy of two supply chains in the cases with and without production cost disruption was compared. The impact of production cost disruption on optimal pricing, production quantity decision and resulting profits for both supply chains was discussed, and the optimal adjustment strategy of two supply chains under different cost disruption was analyzed. The research showed that if disruption cost fall into a certain interval, the optimal decisions for the supply chains should be kept the same as the decisions under the normal situation, and if the disruption cost beyond the interval, it was beneficial for the supply chains to change their pricing and production decisions respectively according to the adjustment strategies. The conclusions were verified through numerical computations. © 2015, CIMS. All right reserved.