Pricing and quality decisions in a supply chain with consumers' privacy concern

You Zhao; Zibin Cui; Jianxin Chen; Rui Hou

doi:10.3934/jimo.2021226

Article Contents

2023, Volume 19, Issue 2: 1211-1235. Doi: 10.3934/jimo.2021226

This issue Previous Article An adaptive large neighborhood search heuristic for multi-commodity two-echelon vehicle routing problem with satellite synchronization Next Article Optimal pricing and ordering strategies for dual-channel retailing with different shipping policies

Pricing and quality decisions in a supply chain with consumers' privacy concern

School of Management, Guangdong University of Technology, Guangzhou, Guangdong 510520, China

^*Corresponding author: Rui Hou
^*Corresponding author: Rui Hou

Received: June 30, 2021

Revised: October 31, 2021

Early access: January 2022

Published: February 2023

Abstract Full Text(HTML) Figure(7) / Table(3) Related Papers Cited by

Abstract

This study considers a supply chain consists of one manufacturer produces a product with a quality level and sells it through one retailer. A stylized model is developed to investigate the impacts of consumers' privacy concerns on pricing, quality decisions, and profitability through the relationship between product quality and personal information. When consumers' privacy concern is considered, the product quality level, the wholesale price, the payoffs of the manufacturer and retailer, and consumer surplus decrease with the personal information loss, whereas the selling price increases if this loss is low. Our results also show that the retailer prefers to charge a high selling price if the information benefit and the personal information loss are low, or the information benefit is relatively high. Moreover, a "win-win-win" outcome can be achieved among the manufacturer, retailer, and consumers if the personal information loss is sufficiently low. In the case of quality-differentiated products, however, although the manufacturer improves the product quality level, the wholesale prices are increased if the information benefit and the personal information loss are low, or the information benefit is high.

Keywords:

Mathematics Subject Classification: Primary: 91A40, 91A80; Secondary: 90B06.

Citation:

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Figure 1. Under Armour HOVR Phantom

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Figure 2. Supply chain structure

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Figure 3. Impacts of consumers privacy concern on firms' payoff and consumer surplus

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Figure 4. Firms' payoff and consumer surplus with general information benefit form

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Figure 5. Under Armour HOVR Sonic shoes

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Figure 6. Supply chain structure

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Figure 7. Impacts of consumers privacy concern on firms' payoff and consumer surplus in a vertically-differentiated supply chain

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Table 1. Comparison among this paper and representative literatures

Literatures	multi	Quality	Privacy	Supply chain
	products	decision	concern	management
[31]	No	Yes	No	No
[40, 36]	No	Yes	No	Yes
[20, 6, 22]	No	No	Yes	No
[7]	No	Yes	Yes	No
[43]	Yes	Yes	No	No
This paper	Yes	Yes	Yes	yes

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Table 2. Notations

Super(sub)scripts	Explanation
S	consumers share personal information
N	consumers not share personal information
H	high-quality product
L	low-quality product
Parameters	Explanation
$ \theta $	willingness to pay for product quality, $ \theta \sim U[0,1] $
$ b $	information benefit coefficient from product quality, $ b \in (0,1) $
$ c $	consumers' personal information loss, $ c > 0 $
$ X $	binary decision parameter for consumers's data sharing, $ X=0,1 $
Decision Variables	Explanation
$ p $	product's selling price
$ q $	product's quality level
$ w $	product's wholesale price
$ \pi_{M} $	payoff of the manufacturer
$ \pi_{R} $	payoff of the retailer
$ CS $	consumer surplus

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Table 3. The improvement of our work

	Our work	[7]
Utility function	$ U_{i}=\theta q_{i}-p_{i}+(b q_{i}^{k}-c)X $, $ i=H,L $	$ U=\theta q-p+b q^{k}X $
Retailer's
objective function	$ \pi_{R,i}^{N}=(p_{i}-w_{i})D_{i}^{N} $, $ i=H,L $	$ \pi_{R}=\int_{0}^{\bar{\theta}}P(\theta)d\theta+\int_{\bar{\theta}}^{1}P d\theta+\int_{\overline{\theta}}^{1}Pd\theta-C(q) $
Manufacturer's
objective function	$ \pi_{M,i}^{N}=(w_{i}-q_{i}^2)D_{i}^{N} $, $ i=H,L $	None

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