Price competition in duopoly supply chains with stochastic demand

• We investigate price competition of two supply chains with stochastic demand.
• Each chain has two levels and could be integrated or decentralized.
• We present three algorithms to calculate the Nash equilibrium of the supply chains.
• We examine the effect of competition intensity on the structures’ Nash equilibrium.
• Increasing the competition intensity will change the structures’ Nash equilibrium.

In the literature, substantial researches have been carried out on supply chain coordination. The majority of these studies suggest a mechanism that enforces the supply chain members to follow the strategies that produce the equilibrium of an integrated supply chain. Moreover, most of researches do not consider the competition among supply chains.In this study, we consider an industry consisting of two distinct supply chains which compete with each other over price. Three algorithms are presented to calculate the equilibrium of three possible industry structures. It is assumed that demand is stochastic with additive form whose random component has a uniform distribution. Furthermore, the effect of competition and demand uncertainty intensity on the Nash equilibrium of the structures and supply chains’ profits are discussed in a numerical example.