Optimal pricing strategy in a dual-channel supply chain: A two-period game analysis

Haijiao Li; Kuan Yang; Guoqing Zhang

doi:10.3934/jimo.2022072

Article Contents

2023, Volume 19, Issue 4: 2955-2985. Doi: 10.3934/jimo.2022072

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Optimal pricing strategy in a dual-channel supply chain: A two-period game analysis

1.
School of Business Administration, Hunan University, Hunan 410082, China
2.
Supply Chain and Logistics Optimization Research Centre, Department of Mechanical, Automotive & Materials Engineering, University of Windsor, Ontario N9B 3P4, Canada

^*Corresponding author: Guoqing Zhang
^*Corresponding author: Guoqing Zhang

Received: October 2021

Revised: March 2022

Published: April 2023

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Abstract

With the development of e-commerce and the rapid updating of products, multi-period pricing has been widely attempted in dual-channel supply chains. In this paper, we develop a two-period game-theoretical model to investigate the problem of two-period pricing and strategy choice for a dual-channel supply chain in which a manufacturer sells a product through its direct channel and an independent retailer. The two common pricing strategies, i.e., dynamic pricing and preannounced pricing, are considered. Through analyzing and comparing, we derive a unique Stackelberg equilibrium under the two pricing strategies and find that dynamic pricing dominates preannounced pricing and achieves a win-win result for the retailer and the manufacturer. Moreover, under this strategy, the manufacturer charges a higher or lower direct price in the second period than in the first period depending on channel competition, whereas the retailer always set a lower retail price in the second period. Finally, we extend our models to consider a unique wholesale pricing strategy, the profit discount factor, and different decision sequences for the selling prices of the two channels. We show that our main results are robust, except that the decision sequence changes the optimal pricing strategy choice of the retailer.

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Mathematics Subject Classification: Primary: 90B50, 91A25; Secondary: 91A80.

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Figure 1. Decision sequence under dynamic pricing strategy

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Figure 2. Decision sequence under preannounced pricing strategy

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Figure 3. Impact of channel substitutability on prices

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Figure 4. Impact of channel substitutability on profits

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Figure 5. Decision sequence under a unique wholesale pricing strategy

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Figure 6. Impact of $ \theta $ on profits under unique wholesale pricing strategy

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Figure 7. Impact of $ \delta $ on profits

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Figure 8. Direct price is determined after retail price

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Figure 9. Direct price and retail price are determined simultaneously

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Figure 10. Impact of $ \theta $ on profits under different decision timings

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