A game theoretic approach for pricing and determining quality level through coordination contracts in a dual-channel supply chain including manufacturer and packaging company

In this study, a dual-channel supply chain (SC) comprising one manufacturer and one packaging company is considered under price and quality dependent demand. The manufacturer and packaging company compete on offered selling price and quality decisions. For the first time, this study investigates how the packaging company can influence the quality of products through packaging products. We also analyze how different game structures affect the optimal pricing and quality decisions as well as SC members' profit. In doing so, we model the investigated SC under three scenarios: (1) non-cooperative game, (2) cooperative game through revenue-sharing contract, and (3) cooperative game through profit-sharing contract. The results show that the competitive game of manufacturer and packaging company is highly beneficial for price-seeking customers. Moreover, from quality-seeking customers' perspective, the cooperation of manufacturer and packaging company under profitsharing contract is more preferable. Furthermore, when the customers' demand is highly sensitive to the products quality, the cooperation of manufacturer and packaging company through profit-sharing contract is more beneficial for them.