CHEMICAL ENGINEERING TRANSACTIONS VOL. 51, 2016 A publication of The Italian Association of Chemical Engineering Online at www.aidic.it/cet Guest Editors: Tichun Wang, Hongyang Zhang, Lei Tian Copyright © 2016, AIDIC Servizi S.r.l., ISBN 978-88-95608-43-3; ISSN 2283-9216 Research on Quality Management of Supply Chain with Multi Manufacturer Competition Jian Tan School of Management Science, Guizhou University of Finance and Economics, Guiyang, 550025 China tanjian123@126.com The paper considers a supply chain contain two competing manufacturers with different market share and a retailer, examines the impact of different market share on product quality level and supply chain profits while two manufacturers competition and cooperation. The conclusions show that: from the market share point of view, whether the two manufacturers are competing or cooperation, the greater the market share of the manufacturers, product quality level, market demand and profits of manufacturers and retailer are higher, and they increasing with the increase of the market share. Under the condition of cooperation, the wholesale price, retail price, product quality level and the profits of manufacture are higher than those of the competition, but the market demand and the profits of the retailer are lower. For the same market share gap, the gap between the two manufacturers' demand and the profits in cooperation model are greater than that of the competition model, while the gap of quality level in the cooperation model is the same as that of the competition model, and they all increase with the increase of the market share gap. 1. Introduction With the increasingly fierce market competition, the competition between enterprises gradually changed into the competition between supply chain and supply chain, in this context, frequently outbreak product quality problems have increasingly become the focus of people's attention, such as Sanlu milk powder incident, Toyota recall event and KFC crash chicken events. The research of product quality management system began in the beginning of twentieth Century, and produced a series of quality management theory and methods, including six sigma method, comprehensive quality management theory, etc.. However, most of these traditional theories and methods focus on the quality improvement of a single enterprise, and seldom take into account the quality control of the upstream and downstream enterprises. In recent years, the quality management of supply chain has received the attention of many scholars. From a supply chain perspective, a non-cooperative dynamic game is formulated (El-Ouardighi and Kim, 2010) in which a single supplier collaborates with two manufacturers on design quality improvements for their respective products and the manufacturers with same initial market demand compete for market demand both on price and design quality. (Xie et al., 2011) considered quality improvement in a given segment of the market, shared by two supplier–manufacturer supply chains which offer a given product at the same price but compete on quality. (Xie et al., 2011) considered the risk-averse behaviour of the players about quality investment and price decision in three different supply chain strategies: Vertical Integration (VI), Manufacturer’s Stackelberg (MS) and Supplier’s Stackelberg (SS). (Lee and Rhee, 2013) tested the two most widely examined coordination schemes, buybacks and revenue-sharing, and find that these two contracts have critical drawbacks in the presence of quality uncertainty. (Ma et al., 2013) investigated the issue of channel coordination for a two-stage supply chain with one retailer and one manufacturer, analyzed the equilibrium behaviors of a two-stage supply chain (SC) under different supply chain structures. (El-Ouardighi, 2014) investigated the potential coordinating power of the revenue sharing contract in a supply chain with one manufacturer and one supplier that collaborate to improve the design quality of a particular finished product. (Yoo, 2014) investigated a joint decision problem of the return policy and product quality in a buyer–supplier supply chain. (Taleizadeh-Ata et al., 2015) discussed the economic production and inventory model in a three- layer supply chain including one distributor, one manufacturer and one retailer for a single-product and DOI: 10.3303/CET1651155 Please cite this article as: Tan J., 2016, Research on quality management of supply chain with multi manufacturer competition, Chemical Engineering Transactions, 51, 925-930 DOI:10.3303/CET1651155 925 general demand functions under three scenarios, and the Stackelberg approach is employed between the members, and the concavity of the profit functions is proved using several theorems. (APAHlioui et al., 2015) deal with the coordination of production, replenishment and inspection decisions for a manufacturing-oriented supply chain with a failure-prone transformation stage, random lead time and imperfect delivered lots and present an easy decision-making tool (indifference curves) to help the manager select the best quality control strategy when considering the entire supply chain. (Giri et al., 2015) considered the pricing and quality decisions of a single product in a two-echelon supply chain with multi-manufacturer and a single retailer. (Modak et al., 2015) explored channel coordination and profit division issues of a manufacturer-distributer- duopolistic retailers supply chain for a product, where the manufacturer supplies lot size of the product that contains a random portion of imperfect quality item. (He et al., 2015) investigated an assemble-to-order supply chain including a manufacturer and two complementary suppliers, one produces component associated with traditional quality while the other produces component associated with environmental quality of the manufacturer's product. (Seifbarghy et al., 2015) discussed optimal decision of a two-level supply chain consisting of a manufacturer and a retailer, where the retailer gives a final product to a competitive market with customer sensitive to price and the customer demand is assumed to be constant depending on the price and quality degree of the final product. (Giri et al., 2015) analysed a closed-loop serial supply chain consisting of a raw material supplier, a manufacturer, a retailer and a collector who collects the used product from consumers, while the remanufacturing of used items solely depends on the quality level of collected items. As can be seen from the above literatures, scholars research on quality competition about manufacturers of supply chain, or assume that the manufacturers have the same initial market share, or assume they have the same product retail price. When the manufacturers have different initial market share, how to decision the retail price and quality level of each manufacturer and how to coordinate the supply chain, the related research in this field are very few. And this is exactly what this paper wants to carry on. 2. Model description We consider a supply chain which contains two manufactures who occupy different market share and a retailer in our models. The manufactures sell the same function and structure products but different qualify level and wholesale price to the retailer, the retailer sell the products to the consumer with different retail price respectively. The two manufactures have different market share, we use 𝛼1𝜙 and 𝛼2𝜙 to express manufacture 1 and manufacture 2 market share, respectively, and 𝛼1 + 𝛼2 = 1, 𝜙 is the base market size. Following (Banker et al., 1998), we assume that the demand information is symmetrically known to SC members, and the demand function is linear in price and quality level. Thus, the demand function for manufacture 1 is: 𝑑𝑖 (𝑝𝑖 , 𝑝𝑗 , 𝑥𝑖 , 𝑥𝑗 ) = 𝛼𝑖 𝜙 − 𝛽𝑝𝑖 + 𝛾𝑝𝑗 + 𝜆𝑥𝑖 − 𝜇𝑥𝑗 (1) Where β(λ) denotes the demand responsiveness to SC’s own price pi (quality level xi, i=1,2; j=1,2; 𝑖 ≠ 𝑗), 𝛾(𝜇) means price (quality level) competition coefficient, which reflects the degree of price (quality level) competition among manufactures. According to (Banker et al., 1998), the cost function for manufacture 𝑖 is given by 𝑐(𝑑𝑖 , 𝑥𝑖 ) = (𝑐 + 𝑣𝑥𝑖 )𝑑𝑖 + 𝜉𝑥𝑖 2 (2) Thus, the quality level selected by a firm affects total costs in two ways. First, investment in a quality improvement program increases fixed production costs 𝜉𝑥𝑖 2 , which is increasing and convex in the quality level 𝑥, and 𝜉 is the fixed cost parameter. Second, the quality level also has an impact on the production cost per unit. Specifically, 𝑐 denotes the variable production cost per unit not including the quality related costs. Given a quality level 𝑥𝑖 selected by manufacture, the unit variable cost increases by 𝑣𝑥𝑖 , where 𝑣 >0, Suppose 𝜆/𝛽 > 𝜈 > 𝜇/𝛾, this condition implies that the change in demand caused by the quality change is greater than the demand fluctuation caused by the price change. The change in demand caused by the change of one's own price or quality is greater than the demand in demand caused by the competitor's price or quality. This hypothesis is consistent with the reality. When the retail price 𝑝𝑖 and cost 𝑐 are equal excluding the quality related costs, the demand must be greater than 0, and the reality is in line with it, namely 𝛼1𝜙 − 𝛽𝑝1 + 𝛾𝑝2 + 𝛼2𝜙 − 𝛽𝑝2 + 𝛾𝑝1 = 𝜙 − 2𝑐(𝛽 − 𝛾) > 0. The objective of each party is to maximize his (her) profits that can be expressed as below: 𝜋𝑀𝑖 (𝑥𝑖 , 𝑤𝑖 ) = (𝑤𝑖 − 𝑐 − 𝜈𝑥𝑖 )(𝛼𝑖 𝜙 − 𝛽𝑝𝑖 + 𝛾𝑝𝑗 + 𝜆𝑥𝑖 − 𝜇𝑥𝑗 ) − 𝜉𝑥𝑖 2 (3) 𝜋𝑅 (𝑝1, 𝑝2) = (𝑝1 − 𝑤1)(𝛼1𝜙 − 𝛽𝑝1 + 𝛾𝑝2 + 𝜆𝑥1 − 𝜇𝑥2) + (𝑝2 − 𝑤2)(𝛼2𝜙 − 𝛽𝑝2 + 𝛾𝑝1 + 𝜆𝑥2 − 𝜇𝑥1) (4) Where 𝜋𝑅 , 𝜋𝑀 and 𝜋𝑇 denote the profit of the retailer, the manufacturer and the SC, respectively. We use superscripts 𝐻 and 𝐽 to denote manufactures cooperative and competition model, respectively. Superscript * 926 denotes the optimal. We formulate the problem as a Stackelberg game model in which the manufacturers and the retailer form a leader–follower relationship. 3. Price and quality coordination in different market share 3.1 Competitive manufacturer model In this model, the two manufacturers sell the same function and structure products but different qualify level and wholesale price to the retailer. The competition between the two manufactures and retailer take place in the following sequence in time:(i) The two manufacturers choose their optimal 𝑥𝑖 and 𝑤𝑖 at the same time to maximum their profits. (ii) The retailer sells their products to the consumer and chooses different optimal 𝑝𝑖 to maximum his profits. The two manufacturers take the retailer’s reaction into consideration when choosing their strategy. The retailer’s reaction function for a given 𝑤𝑖 and 𝑥𝑖 can be derived from the first-order derivative of 𝜋𝑅 in Eq. (4): 𝑑𝜋𝑅 /𝑑𝑝𝑖 = −2𝛽𝑝𝑖 + 2𝛾𝑝𝑗 + 𝛽𝑤𝑖 − 𝛾𝑤𝑗 + 𝜆𝑥𝑖 − 𝜇𝑥𝑗 + 𝜙𝛼𝑖 (5) Solving Eq. (5), we obtain the equilibrium 𝑝1 and 𝑝2 : 𝑝i = ((𝛽 2 − 𝛾2)𝑤𝑖 + (𝛽𝜆 − 𝛾𝜇)𝑥𝑖 + 𝛾𝜆𝑥𝑗 − 𝛽𝜇𝑥𝑗 + 𝛽𝜙𝛼𝑖 + 𝛾𝜙𝛼𝑗 )/2(𝛽 2 − 𝛾2) (6) Note that the Hessian of 𝜋𝑅 is negative definite for all values of 𝑝1 and 𝑝2 𝑖𝑓 𝛽2 − 𝛾2 < 0.Substituting Eq.(6) into Eq.(3), the first-order conditions characterizing equilibrium 𝑥𝑖 and 𝑤𝑖 are: 𝑑𝜋𝑀𝑖 /𝑑𝑤𝑖 = (𝑐𝛽 − 2𝛽𝑤𝑖 + 𝛾𝑤𝑗 + 𝜆𝑥𝑖 + 𝛽𝜈𝑥𝑖 − 𝜇𝑥𝑗 + 𝜙𝛼𝑖 )/2 = 0 (7) 𝑑𝜋𝑀𝑖 /𝑑𝑥𝑖 = (−𝑐𝜆 + (𝜆 + 𝛽𝜈)𝑤𝑖 − 𝛾𝜈𝑤𝑗 − 2𝜆𝜈𝑥𝑖 − 4𝜉𝑥𝑖 + 𝜇𝜈𝑥𝑗 − 𝜈𝜙𝛼𝑖 )/2 = 0 (8) Note that the Hessian of 𝜋𝑀1 and 𝜋𝑀2 are negative definite for all values of 𝑥𝑖 and 𝑤𝑖 𝑖𝑓 −(𝜆 + 𝛽𝜈) 2/4 + 𝛽(𝜆𝜈 + 2𝜉) < 0. From Eq. (7) ~ Eq. (8),we find the manufactures’ optimal wholesale price and quality level. Then we can get demand and profits of each member in SC as follows: 𝑥𝑖 𝐽∗ = 𝐶(𝐸(𝐹 − 4𝐴) − 𝐹𝜙𝛼𝑗 + 4𝐴𝜙𝛼𝑖 )/(16𝐴 2 − 𝐹2) (9) 𝑑𝑖 𝐽∗ = 2𝛽𝜉(𝐸(𝐹 − 4𝐴) − 𝐹𝜙𝛼𝑗 + 4𝐴𝜙𝛼𝑖 )/(16𝐴 2 − 𝐹2) (10) 𝜋𝑀𝑖 𝐽∗ = 4𝐴𝜉(𝐸(𝐹 − 4𝐴) − 4𝐴𝜙𝛼𝑖 + 𝐹𝜙𝛼𝑗 ) 2/ (16𝐴2 − 𝐹2)2 (11) 𝜋𝑅 𝐽∗ = (4𝛽2𝜉2(2𝑐𝐵(𝐹 − 4𝐴)2(𝐸 − 𝜙) + (𝛽(16𝐴2 + 𝐹2) − 8𝛾𝐴𝐹)𝜙2)/𝐵(16𝐴2 − 𝐹2)2 (12) Where 𝐴 = −(𝜆 + 𝛽𝜈)2/4 + 𝛽(𝜆𝜈 + 2𝜉),𝐵 = 𝛽2 − 𝛾2,C=𝜆 − 𝛽𝜈, 𝐷 = 𝜇 − 𝛾𝜈, 𝐸 = 𝑐(𝛽 − 𝛾), 𝐹 = 𝐶𝐷 − 4𝛾𝜉, in which 𝐴 < 0, 𝐵 < 0. From the condition 𝜆/𝛽 > 𝜈 > 𝜇/𝛾, we can get C>0, 𝐷<0 and 𝐹<0. 3.2 Cooperative manufacturer model In this model, the cooperative manufacturer sell the same function and structure products but different qualify level and wholesale price to the retailer. The competition between the two manufacturer and retailer take place in the following sequence in time:(i) The two cooperative manufacturers choose their optimal 𝑥𝑖 and 𝑤𝑖 at the same time to maximum their overall profits. (ii) The retailer sells their products to the consumer and chooses different optimal 𝑝𝑖 to maximum his profits. From Eq. (3) ~ Eq. (4), the profits function for the SC each member as follows: 𝜋𝑀 (𝑥1, 𝑤1, 𝑥2, 𝑤2) = (𝑤1 − 𝑐 − 𝜈𝑥1)(𝛼1𝜙 − 𝛽𝑝1 + 𝛾𝑝2 + 𝜆𝑥1 − 𝜇𝑥2) − 𝜉𝑥1 2 +(𝑤2 − 𝑐 − 𝜈𝑥2)(𝛼2𝜙 − 𝛽𝑝2 + 𝛾𝑝1 + 𝜆𝑥2 − 𝜇𝑥1) − 𝜉𝑥2 2 (13) 𝜋𝑅 (𝑝1, 𝑝2) = (𝑝1 − 𝑤1)(𝛼1𝜙 − 𝛽𝑝1 + 𝛾𝑝2 + 𝜆𝑥1 − 𝜇𝑥2) + (𝑝2 − 𝑤2)(𝛼2𝜙 − 𝛽𝑝2 + 𝛾𝑝1 + 𝜆𝑥2 − 𝜇𝑥1) (14) The two manufacturer take the retailer’s reaction into consideration when choosing their strategy. The retailer’s reaction function for a given 𝑤𝑖 and 𝑥𝑖 can be derived from the first-order derivative of 𝜋𝑅 in Eq. (14), the results as Eq. (6) show. Substituting Eq. (6) into Eq. (13), the first-order conditions characterizing equilibrium 𝑥𝑖 and 𝑤𝑖 are: 𝑑𝜋𝑀 /𝑑𝑤𝑖 = (𝑐𝛽 − 𝑐𝛾 − 2𝛽𝑤𝑖 + 2𝛾𝑤𝑗 + 𝜆𝑥𝑖 + 𝛽𝜈𝑥𝑖 − 𝜇𝑥𝑗 − 𝛾𝜈𝑥𝑗 + 𝜙𝛼𝑖 )/2 = 0 (15) 𝑑𝜋𝑀 /𝑑𝑥𝑖 = (−𝑐𝜆 + 𝑐𝜇 + (𝜆 + 𝛽𝜈)𝑤𝑖 − (𝜇 + 𝛾𝜈)𝑤𝑗 − 2𝜆𝜈𝑥𝑖 − 4𝜉𝑥𝑖 + 2𝜇𝜈𝑥𝑗 − 𝜈𝜙𝛼𝑖 )/2 = 0 (16) 927 Note that the Hessian of 𝜋𝑀 is negative definite for all values of 𝑥𝑖 and 𝑤𝑖 𝑖𝑓 (4𝐴 + 2𝐹 − 𝐷2)(4𝐴 − 2𝐹 − 𝐷2) < 0.From Eq. (15) ~ Eq. (16), we find the two manufactures’ optimal wholesale price and quality level. Then we can get demand and profits of each member in SC as follows: 𝑥𝑖 𝐻∗ = 𝐸(𝐶−𝐷)(𝐷2−4𝐴+2𝐹)+(4𝐶𝐴+𝐷𝐹−4𝛾𝐷𝜉)𝜙𝛼𝑖+(𝐷 3−2𝐶𝐹−4𝐴𝐷)𝜙𝛼𝑗 (4𝐴+2𝐹−𝐷2)(4𝐴−2𝐹−𝐷2) (17) 𝜋𝑀𝑖 𝐻∗ = 𝜉(−𝐸2(𝐷2−4𝐴+2𝐹)+4𝐴𝜙2 𝛼𝑖 2+2𝐸(𝐷2+𝐹)𝜙𝛼𝑗−𝐷 2𝜙2𝛼𝑗 2+2𝜙𝛼𝑖(𝐸(𝐹−4𝐴)−𝐹𝜙𝛼𝑗)) (4𝐴+2𝐹−𝐷2)(4𝐴−2𝐹−𝐷2) (18) 𝑑𝑖 𝐻∗ = (2𝜉(𝐸2(𝐷2−4𝐴+2𝐹)+(4𝛽𝐴+2𝛾𝐹+𝛽𝐷2)𝜙𝛼𝑖+(𝛾𝐷 2−4𝐴𝛾−2𝛽𝐹)𝜙𝛼𝑗)) (4𝐴+2𝐹−𝐷2)(4𝐴−2𝐹−𝐷2) (19) 4. Results analysis Conclusion 1: Whether the two manufacturers are competing or cooperation, the greater the market share of the manufacturers, product quality, market demand and profits of manufacturers and retailer are higher, and they increasing with the increase of the market share. Proof: According to the results of the third section, we get 𝑥1 𝐽∗ − 𝑥2 𝐽∗ = 𝐶𝜙(𝛼1 − 𝛼2)/(4𝐴 − 𝐹), because 𝜆/𝛽 > 𝜈 > 𝜇/𝛾 , we can get 4𝐴 − 𝐹 > 0 , 4𝐴 + 𝐹 < 0 , and 𝐶 > 0 , so when 𝛼1 ≥ 𝛼2 , 𝑥1 𝐽∗ ≥ 𝑥2 𝐽∗ . 𝑑𝑥1 𝐽∗ / 𝑑𝛼1 = 4𝐴𝐶𝜙/(16𝐴2 − 𝐹2) > 0 and 𝑑𝑥1 𝐽∗ /𝑑𝛼2 = 𝐹𝐶𝜙/(−16𝐴 2 + 𝐹2) < 0. In the same way, we get 𝑑𝑥𝑖 𝐻∗/𝑑𝛼𝑖 > 0 and when 𝛼1 ≥ 𝛼2, 𝑥1𝐻∗ ≥ 𝑥2𝐻∗. 𝑑1 𝐽∗ − 𝑑2 𝐽∗ = 2𝛽𝜉𝜙(𝛼1 − 𝛼2)/(−16𝐴 2 + 𝐹2), because −16𝐴2 + 𝐹2 > 0 , so when 𝛼1 ≥ 𝛼2, 𝑑1 𝐽∗ ≥ 𝑑2 𝐽∗ . In the same way, we can get𝑑1𝐻∗ ≥ 𝑑2𝐻∗ when 𝛼1 ≥ 𝛼2 . In virtue of 𝜙 − 2𝐸 > 0 , 𝐴 < 0 and 16𝐴2 − 𝐹2 < 0 , so when 𝛼1 ≥ 𝛼2 , 𝜋𝑀1 𝐽∗ − 𝜋𝑀2 𝐽∗ = 4𝐴𝜉𝜙(𝛼1 − 𝛼2)(𝜙 − 2𝐸)/ (16𝐴2 − 𝐹2) ≥ 0. When 𝛼1 ≥ 𝛼2, 𝜋𝑀1 𝐻∗ ≥ 𝜋𝑀2 𝐻∗ can be get by the same way. In order to further verify the impact of market share changes on product quality, wholesale price, retail price and profit, we use numerical simulation, as shown in table 1. Table 1: Market share change numerical simulation (ϕ=10000, β=41, γ=22, c=22, ν=0.26, λ=12, μ=6, ξ=4) Model 𝛼1 = 0.5 𝛼2 = 0.5 𝛼1 = 0.6 𝛼2 = 0.4 𝛼1 = 0.7 𝛼2 = 0.3 𝛼1 = 0.8 𝛼2 = 0.2 𝛼1 = 0.9 𝛼2 = 0.1 𝑤1 J 100 110 120 130 139 H 145 153 161 169 178 𝑤2 J 100 90 80 71 61 H 145 137 129 120 112 𝑝1 J 183 196 209 222 235 H 205 217 230 242 254 𝑝2 J 183 170 157 144 131 H 205 193 181 169 157 𝑥1 J 6.41 7.21 8.02 8.82 9.63 H 8.00 8.81 9.61 10.42 11.22 𝑥2 J 6.41 5.60 4.79 3.99 3.18 H 8.00 7.20 6.39 5.59 4.78 𝑑1 J 1568 1765 1963 2160 2357 H 1148 1398 1648 1899 2149 𝑑2 J 1568 1370 1173 976 778 H 1148 897 647 397 146 𝜋𝑀1 J 119744 151790 187632 227269 270702 H 138379 179674 224943 274184 327400 𝜋𝑀2 J 119744 91493 67037 46377 29512 H 138379 101057 67709 38334 12933 𝜋𝑅 J 258749 259985 263695 269879 278536 H 138635 140624 146592 156539 170464 As can be seen from table 1, with the increase in the market share of manufacturer 1, whether in the manufacturer's competition or cooperation mode, the product wholesale price, retail price, product quality, 928 profits of manufacturer and retailer increased. And the larger market share of manufacturer, his products wholesale price, retail price, product quality level, profits of manufacturer and retailer are also higher. From table 2 we can see that the cooperation between the manufacturers is beneficial to improve the quality level of products and the profits of the manufacturers, but not beneficial to the retailer. Manufacturers' competition is beneficial to improve the profits of retailer, but not beneficial to the manufacturers. Then we can get conclusion 2 and 3. Conclusion 2: Under the condition of cooperation, the wholesale price, retail price, product quality level and the profits of manufacture are higher than those of the competition, but the market demand and the profits of the retailer are lower. Table 2: Products quality level, market demand and profits gap of two manufacturers change with the market share of the gap (ϕ=10000, β=41, γ=22, c=22, ν=0.26, λ=12, μ=6, ξ=4) ∆α 0 0.2 0.4 0.6 0.8 ∆𝑥 J 0 1.61 3.23 4.83 6.44 H 0 1.61 3.22 4.83 6.44 ∆∆𝑥 0 0 0 0 0 ∆𝑑 J 0 395 790 1184 1579 H 0 501 1001 1502 2003 ∆∆𝑑 0 106 211 318 424 ∆𝜋𝑀 J 0 60297 120595 180892 241190 H 0 78617 157234 235850 314467 ∆∆𝜋𝑀 0 18320 36639 54958 73277 Conclusion 3: For the same market share gap, the gap between the two manufacturers' demand and the profits in cooperation model are greater than that of the competition model, while the gap of quality level in the cooperation model is the same as that of the competition model, and they all increase with the increase of the market share gap. Conclusion 3 denotes that with the increase of the market share gap of the two manufacturers, both in the competition and cooperation models, the gap of product quality level, the demand and the profits of the two manufacturers increase, the increase of the quality level gap in competition model is in agreement with the cooperation model. Compared with competition model, the increase range of the gap of the product demand and the profits of the two manufacturers in the cooperation model are larger. The above three conclusions show that, for the competition manufacturers, the market share has important influence on the quality level of the products, the greater the market share, the higher the quality of the products, and the higher of the profits. Manufacturers' cooperation is conducive to the improvement of product quality level and the increase of profits, but not conducive to the retailer. 5. Conclusion This paper focuses on a supply chain contained two competing manufacturers with different market share and a retailer, examined the impact of different market share on product quality level and supply chain profits while the two manufacturers' competition and cooperation. By means of game theory and simulations, we find that: from the market share point of view, whether the two manufacturers are competing or cooperation, the greater the market share of the manufacturers, product quality level, market demand and profits of manufacturers and retailer are higher, and they increasing with the increase of the market share. Under the condition of cooperation, the wholesale price, retail price, product quality level and the profits of manufacture are higher than those of the competition, but the market demand and the profits of the retailer are lower. For the same market share gap, the gap between the two manufacturers' demand and the profits in cooperation model are greater than that of the competition model, while the gap of quality level in the cooperation model is the same as that of the competition model, and they all increase with the increase of the market share gap. This paper only analyses the situation of two manufacturers and one retailer, and the coordination of supply chain including multi manufacturers and retailers with different market share is our further research. Acknowledgments This work is supported by Guizhou Natural Science Foundation Project ((2014) 264). 929 References Banker-Rajiv D., Sinha-Kingshuk K., 1998, Quality and Competition, Management Scienc, 44(9), 1179-1192, Doi: 10.1287/mnsc.44.9.1179. El-Ouardighi F., Kim B.,2010,Supply quality management with wholesale price and revenue-sharing contracts under horizontal competition, European Journal of Operational Research, 206(2), 329-340, Doi: 10.1016/j.ejor.2010.02.035. El-Ouardighi F., 2014, Supply quality management with optimal wholesale price and revenue sharing contracts: A two-stage game approach,International Journal of Production Economics, 156, 260-268, Doi: 10.1016/j.ijpe.2014.06.006. Gir B. C., Sharma S., 2015, Optimizing a closed-loop supply chain with manufacturing defects and quality dependent return rate,Journal of Manufacturing Systems, 35, 92–111, Doi: 10.1016/j.jmsy.2014.11.014. Giri B. C., Chakraborty A., Maiti T., 2015, Quality and pricing decisions in a two-echelon supply chain under multi-manufacturer competition,International Journal of Advanced Manufacturing Technology, 78(9), 1927- 1941, Doi: 10.1007/s00170-014-6779-2. He R., Xiong Z., Xiong Y., 2015, Supply chain collaboration with complementary quality design and greener production,European Journal of Industrial Engineering, 9(4), 470-511, Doi: 10.1504/EJIE.2015.070328. Hlioui R., Gharbi A., Hajji A., 2015, Integrated quality strategy in production and raw material replenishment in a manufacturing-oriented supply chain,International Journal of Advanced Manufacturing Technology, 81(1), 335-348, Doi: 10.1007/s00170-015-7177-0. Lee C. H., Rhee B.D. ,ChengT. C. E., 2013, Quality uncertainty and quality-compensation contract for supply chain coordination,European Journal of Operational Research, 228(3), 582-591, Doi: 10.1007/s00170-014- 6779-2. Ma P., Wang H., Shang J., 2013, Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts,International Journal of Production Economics, 146(2), 745-755, Doi: 10.1016/j.ijpe.2013.09.004. Ma P., Wang H., Shang J., 2013, Supply chain channel strategies with quality and marketing effort-dependent demand,International Journal of Production Economics, 144(2), 572-581, Doi: 10.1016/j.ijpe.2013.04.020. Modak-Mohan N., Panda S., Sana-Sankar S., 2015, Three-echelon supply chain coordination considering duopolistic retailers with perfect quality products,International Journal of Production Economics, 5, 1-15, Doi: 10.1016/j.ijpe.2015.05.021. Seifbarghy M., Nouhi K., Mahmoudi A., 2015,Contract design in a supply chain considering price and quality dependent demand with customer segmentation, International Journal of Production Economics, 167, 108–118, Doi: 10.1016/j.ijpe.2015.05.004. Taleizadeh-Ata A., Noori-Daryan M.,Tavakkoli-Moghaddam R., 2015, Pricing and ordering decisions in a supply chain with imperfect quality items and inspection under buyback of defective items. International Journal of Production Research, 53(15), 4553-4582, Doi: 10.1080/00207543.2014.997399. Xie G., Wang S., Lai K. K., 2011,Quality improvement in competing supply chains, International Journal of Production Economics, 134(1), 262-270, Doi: 10.1016/j.ijpe.2011.07.007. Xie G., Yue W., Wang, S., Lai K. K., 2011,Quality investment and price decision in a risk-averse supply chain,European Journal of Operational Research, 214(2), 403-410, Doi: 10.1016/j.ejor.2011.04.036. Yoo S. H., 2014, Product quality and return policy in a supply chain under risk aversion of a supplier, International Journal of Production Economics, 154, 146-155, Doi: 10.1016/j.ijpe.2014.04.012. 930