Abstract Given a supply chain consisting of an incumbent manufacturer, an entrant manufacturer and a retailer, the retailer is supplied by two manufacturers with differentiated brands (a good brand and an average brand). According to the power structure differences, and considering the brand differentiation, four types of models are constructed in this study, which include the benchmark models and two Stackelberg game models by the manufacturers and retailer respectively. The results show that, before the entrant manufacturer enters the market, the imbalanced power between the incumbent manufacturer and the retailer plays no role on the optimal pricing or the profits of the whole supply chain. Faced with the entrant’s entry, the power structures will influence the two manufactures’ profit because it may soften the price competition. The incumbent manufacturer’ power advantage leads to higher optimal wholesale price as well as a higher retail price. This implies that the incumbent manufacturer’s unfair advantage decreases the profit of whole supply chain.
