Based On Price And Service Supply Chain Coordination

Traditional theory of industrial organization appoints that, as the result of double marginalization the centralized supply chain is superior than the decentralized one. If supply chain chose the decentralized structure, on the one hand, distributors will set the retail price too high, on the other hand, suppliers will set a higher wholesale price. With the unreasonable retail price and wholesale price, both the distributor and the supplier's gains were lower than their maximum benefit. And if the supply chain chose the centrilized structure, the integrated supplier and distributor will achieve a win-win situation.McGuireandStaelin(1983) drew attention to situations where decentralization structure might be preferable under conditions of strong product substitution. And product substitution itself is often the result of a choice to dierentiate products orservices in the face of a heterogeneous market. So the issues of market heterogeneity, product dierentiation,double marginalization and supply chain structure appear to be interwoven in a complex way especially under the situation which supply chain not just supply products but also additional services.In this paper, we investigate what is the better supply chain structure under different situations, the centrilized ones or decentrilized? And at the same time, we studied what is the better control measure when the supply chain is controlled by supplier, price control or service control.