The supply chain of modular consumer electronics, such as LCD TVs, PCs, and smart phones has gradually changed from traditional vertical integration to horizontal division of labor. Almost all the manufacturers of consumer electronics in Japan have changed their sales channels from the affiliated electronics stores to the large-scale retailers such as BicCamera, LABI and so on. Therefore, their attentions on sales planning has been moved to negotiation with such large-scale retailers on trading price and volume. Since the market power deviation, comparing with the retailers, manufacturers are getting difficult to achieve enough profits with the terms decided by negotiation. Information asymmetry, market power deviation and pursuing self-interest only are considered as the main reasons of Double Marginalization (DM) phenomenon.

In this study, after discussing the DM phenomenon in a two-level supply chain which consists of a consumer electronics manufacturer and a retailer, a trading system based on cooperative relation is proposed to eliminate the DM phenomenon in order to help both players to build a win-win relationship. Effectiveness on total profit of whole supply chain and profit of each player with the proposed trading system is to be confirmed by numerical experiments. Products features as well as cost structurers features of manufacturer and retailer are considered to discuss the applicability of the trading system.