Advance selling and contracting strategies under supply chain competition

In the fiercely competitive seasonal product market, manufacturers often compete by selling goods in advance through retailers. While supply chain competition is common in practice, it remains under-explored in the literature. In this paper, we examine how supply chain competition affects supply chain members’ advance selling and pricing contract decisions, offering several insights: (i) Contrary to existing findings, although advance selling is the equilibrium strategy for both supply chains when the stockpiling cost is low, it hurts both chains’ profits, creating a Prisoner’s Dilemma. (ii) Under supply chain competition, an asymmetric advance-selling equilibrium arises when the stockpiling cost is moderate, with one chain adopting advance selling while the other does not. (iii) Under an asymmetric equilibrium, the manufacturer that forgoes advance selling is worse off under a dynamic wholesale-price contract but may be better off under a commitment wholesale-price contract. (iv) In equilibrium, when both supply chains engage in advance selling, a commitment wholesale-price contract with less price adjustment flexibility is more attractive when the stockpiling cost is low; as it increases, the dynamic contract becomes more attractive.