Abstract: This paper explores the cooperative pricing decisions problem for two related products in a two-echelon supply chain that consists of two manufacturers and one common retailer from the perspective of cross elasticity of demand. The results indicate that:for manufacturers, in the complementary supply chain, the vertical alliance pricing is the optimal strategy when the cross elasticity effect of negative demand is low; otherwise, the centralized alliance pricing is the dominant strategy. These two strategies both can achieve Pareto improvement. In the competitive supply chain, the centralized alliance pricing is an optimal strategy when the cross elasticity effect of positive demand is low; otherwise, the horizontal alliance pricing is the dominant strategy, but both retailers and consumers' profit will suffer, the Pareto improvement cannot be obtained.

Key words: many to one supply chain, cross elasticity of demand, alliance pricing decision, Stackelberg game