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| Two-Part Tariff Contract for Competing Manufacturers with Common Retailer’s Extended Warranties |
| MA Jianhua，AI Xingzheng，PAN Yanchun，YANG Wen |
| 1. Shenzhen University, Shenzhen, Guangdong, China; 2. University of Electronic Science and Technology of China, Chengdu, China |
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Abstract This study proposes a supply chain model consisting of two competing manufacturers and one common retailer, where the retailer provides pay-needed extended warranties for the products sold. Each manufacturer has two types of vertical contract strategy options, either a wholesale price or a two-part tariff contract. Taking the wholesale price as the benchmark, the research aims to study the dominant design mechanism for each manufacturer’s two-part contract, and reveal how retailers’ extended warranties and market competition affect the two-part tariff contract choice equilibrium. The results show that both manufacturers conducting two-part tariff contract are found to be the equilibrium of the contract choice. The equilibrium two-part tariff contracts coordinate the total supply chain system and profit the retailer. When market competition is not intense and extended warranty length is lower than certain threshold which depends on extended warranty sensitivity parameter significantly, there exists the dominant fixed fee equilibrium region. If the fixed fee parameters are set in the dominant fixed fee equilibrium region, then the equilibrium two-part tariff contracts profit the manufacturers.
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Received: 25 July 2017
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