Price competition between two leader–follower supply chains with risk-averse retailers under demand uncertainty

We develop a price competition model under a demand uncertainty environment between two leader–follower supply chains that each of them consists of one risk-neutral manufacturer and one risk-averse retailer. Two power structures within each supply chain that are manufacturer’s Stackelberg (MS) and retailer’s Stackelberg (RS) are considered. We also assume that each manufacturer pays a fraction of risk cost to its retailer. We formulate the price competition between two supply chains using a two-stage Stackelberg game approach and develop four procedures (four equilibrium tables) to obtain the optimal wholesale and retail prices for the leader and follower supply chains under various supply chain network structures. Also, the business and managerial implications resulted from the sensitivity analysis of parameters such as the retailer’s risk sensitivity, the fraction of risk cost shared by manufacturers, and the competition intensity (substitutability coefficient of two products) are discussed.