Article Contents
Article Contents

# Pricing strategy and product quality design with platform-investment

• * Corresponding author: Gongbing Bi

The research is supported by the Key Program of the National Natural Science Foundation of China [Grant Number: 71731010], the National Natural Science Foundation of China [Grant Number: 72171214, 71571174, 72101003, 71801203], the Key Research and Development Project of Anhui Province [Grant Number: 201904a07020040], the Key Education Department Project of Anhui Province [SK2020A0388] and Key Project of West Anhui University [wxsk201923]

• With the development of business, more consumers are quality sensitive and improving the product quality becomes particularly important. We mainly discuss two investment strategies: retailer-investment and platform-investment. Compared with non-investment case, only if consumer sensitivity is not too high, it is profitable for the retailer to select retailer-investment. When both retailer-investment and platform-investment are viable, the choice of investment mechanism depends on the profit-sharing ratio. Particularly, if the ratio is within a certain range, the optimal investment strategy is platform-investment, achieving a triple-win outcome. Besides, to effectively alleviate the contradiction between the retailer's moral hazard problem and the sustainable value-added effect of platform-investment, we further research the contract term. These results give us some meaningful management inspirations in investment mechanism.

Mathematics Subject Classification: Primary: 90B50; Secondary: 90B60.

 Citation:

• Figure 1.  The impact of $\lambda$ on decision variables

Figure 2.  The impact of $\lambda$ and $\theta$ on balance profit

Figure 3.  The impact of $\theta$ on supply chain performance

Figure 4.  The impact of $\theta$ on supply chain performance

Table 1.  Notations

 Variables Description $U$ The utility that a consumer derives from the product $V$ The consumer's utility from the product functional attributes $p_{i}$ The unit retail price of the product under different scenarios, which is a decision variable of the retailer, where $i=NI,RI,PI$ $c$ The unit cost of the product $\lambda$ Consumer sensitivity to the quality-improvement product $e_i$ The product quality-improvement level, which is a decision variable of the retailer or platform, where $i=RI,PI$ $k$ The product quality-improvement cost parameter of the retailer $\beta$ The product quality-improvement cost parameter of the platform $\theta$ The profit-sharing ratio given by the platform $\pi_i$ The retailer's profit, where $i=NI,RI,PI$ $\Pi_i$ The platform's profit, where $i=PI$
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