Abstract: This paper investigates pricing and sales efforts decisions for a supply chain with one manufacturer and one retailer. The demand is sensitive to both sales effort and retail price. We establish and compare several models which are based on non-cooperative games and cooperative game to reflect different channel power structures and different information structures by using game theory approach and numerical analysis. The findings show that the power shifting from manufacturers to retailers reduces the profit of the manufacturer. But to the retailer, the outcome is determined by the sensitivities of the customers towards price and sales effort level, the sales effort cost, and the information structure. The dominant agent may increase his profit through getting more information about the other side. If the dominant retailer has to depend on prior probability distribution of the manufacturer’s cost, the moderate variance may lead to a favorable price for the retailer who overvalues the manufacturer’s cost. A wholesale price with effort sharing is founded to coordinate the supply chain. Further, we establish the conditions and the feasible region where the manufacturer and the retailer can bargain to divide the extra-profits accrued from coordination.

Key words: supply chain, channel power structure, dominant manufacturer, dominant retailer, sales effort, private information