Pricing decision problem for substitutable products based on uncertainty theory

Increasing studies in marketing and distribution channels have shown that the power of manufacturers and retailers is reversing. In this paper, we consider a pricing decision problem in which two different manufacturers compete to distribute differentiated but substitutable products through a common...

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Bibliographic Details
Published in:Journal of intelligent manufacturing 2017-03, Vol.28 (3), p.503-514
Main Authors: Huang, Hu, Ke, Hua
Format: Article
Language:English
Subjects:
Analysis
Business and Management
Control
Costs
Decision making
Decision theory
Experiments
Fuzzy sets
Game theory
Inventory
Machines
Manufacturers
Manufacturing
Manufacturing costs
Markup
Mathematical models
Mechatronics
Power
Pricing
Pricing policies
Processes
Production
Production costs
Random variables
Retail stores
Retailing industry
Robotics
Sales
Set theory
Studies
Subject specialists
Supply chains
Uncertainty
Variables
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Summary:Increasing studies in marketing and distribution channels have shown that the power of manufacturers and retailers is reversing. In this paper, we consider a pricing decision problem in which two different manufacturers compete to distribute differentiated but substitutable products through a common retailer under different power structures. The manufacturing costs, sales costs and demands are characterized by uncertain variables. Meanwhile, uncertainty theory and game-theory-based modeling approaches are employed to formulate the pricing decision problem with three different power structures under uncertain environment. How to make the optimal pricing decisions on wholesale prices and retailer markups under three possible scenarios is derived. Numerical experiments are also given to examine the effects of power structures on the equilibrium prices and profits in uncertain environment. It is found that if the sales cost is high, consumers can enjoy lower prices when facing a powerful retailer and the super retailer can also make the supply chain more efficient.
ISSN:0956-5515
1572-8145
DOI:10.1007/s10845-014-0991-7