Interactions between supplier encroachment format and pricing scheme with horizontal shareholding

This paper examines the interactions between supplier encroachment formats (centralized encroachment or decentralized encroachment) and pricing schemes (specific pricing or uniform pricing) in a two-tier supply chain consisting of one supplier and two incumbent retailers, wherein there exists horizontal shareholding between downstream retailers. The analytical results indicate that, under specific pricing scheme, both the incumbent retailers and the supplier prefer decentralized encroachment if the magnitude of shareholding level and the encroachment cost are high. Under uniform pricing scheme, both the incumbent retailers prefer decentralized encroachment while the supplier prefers centralized encroachment. Under centralized encroachment format, both the acquiring retailer and the supplier have consistent preference over pricing scheme (i.e., specific pricing scheme) while the acquired retailer prefers uniform pricing scheme. Under decentralized encroachment format, both the incumbent retailers prefer uniform pricing scheme if the magnitude of shareholding level is low and the encroachment cost is high, or the magnitude of shareholding level is high; both the supplier and the encroaching retailer prefer specific pricing scheme if the encroachment cost is high.