Manufacturers' Optimal Consumer Rebate Strategy in Competitive Market

Under a competitive market composed of two exclusive supply chains, this paper examines manufacturers' optimal rebate strategy and its impact on manufacturers' and retailers' wholesale prices, selling prices and profits, etc. We also study optimal rebate strategy considering rebate costs and the retailer's optimal subsidy strategy. By establishing and solving a three-stage dynamic game model, we find that (1) when the competition intensity is not very strong, the rebate competition among manufacturers leads to a win-win situation for all manufacturers and retailers. (2) considering rebate cost, manufacturers may fall into prisoner's dilemma under certain conditions. (3) with subsidy, by paying an arbitrarily small subsidy to retailer's respective manufacturer, manufacturers may be willing to offer rebate, sometimes the other manufacturer will offer rebate voluntarily without subsidy.