Abstract: Motivated by the common practice that many manufactures usually sell their products through a samelarge-scale retailer,this paper studies the optimal pricing and inventory decisions for two substitutable products thatare provided by two competitive manufactures.Starting from the choice behavior of customers,an in-depth investigation of two scenarios,in which the retailer and the manufactures set the retailing prices respectively,are provided.Research shows that under the multi-nominal logit(MNL)choice model,the optimal joint pricing of the retailer should choose an equal unit profit,and the pricing game between the manufactures has a unique Nash equilibrium.Numerical experiments are conducted respectively,to evaluate the optimal pricing decisions and profitallocations,for the scenarios where the manufacturers and the retailer have/has stronger bargaining powers.Results have uncovered some interesting managerial in-sights for the selling-mode choice of relevant enterprises.

Key words: substitutable products, customer choice behavior, multi-nominal logit model, optimal pricing, game