Strategic wholesale pricing in a supply chain with a potential entrant

Problem definition: Few papers have explored the impact of price matching negotiation (PM), in which a channel matches its price with the resulting wholesale price bargained by another channel, on firms’ performances, consumer welfare, and social welfare, with and without supply chain coordination. Academic/practical relevance: Negotiation has been widely seen in determining both uniform and discriminatory wholesale prices, which affect outcomes of competitive supply chain practices. Methodology: To characterize the PM mechanism, we use game theory and Nash bargaining theory to compare PM with simultaneous negotiation (SN) through a common-seller two-buyer differentiated Bertrand competition model. Results: Our analysis reveals that PM can benefit the seller but hurt all buyers, which is at odds with some fair wholesale pricing clauses intending to protect buyers. Under coordination with side payments, however, all firms can conditionally benefit more from PM than from SN. Despite firms’ gains, PM leads to less consumer utility and social welfare compared with SN, unless the second buyer in PM is considerably less powerful than the first buyer. Coordination further worsens PM’s negative impact on consumer utility and social welfare. Moreover, the existence of a spot market can increase the wholesale price in PM, hurting buyers, consumers, and society. Furthermore, the qualitative results about PM remain robust under an alternative disagreement point for PM, multiple buyers, and other extensions. Managerial implications: This paper delivers insights on when price matching in supply chain wholesale price negotiation can benefit a seller, buyers, consumers, and society in a variety of scenarios. It advocates how managers can use PM to their own advantages and provides rationale to decision makers for policy regulations regarding wholesale pricing.

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Two‐period information‐sharing and quality decision in a supply chain under static and dynamic wholesale pricing strategies

International Transactions in Operational Research ◽

10.1111/itor.13081 ◽

2021 ◽

Author(s):

You Zhao ◽

Rui Hou ◽

Xiaogang Lin ◽

Qiang Lin

Keyword(s):

Supply Chain ◽

Information Sharing ◽

Pricing Strategies ◽

Quality Decision ◽

Wholesale Pricing

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Transaction Models within a Supply Chain and Optimal Wholesale Pricing of Two Competing Suppliers

Journal of the Korean Operations Research and Management Science Society ◽

10.7737/jkorms.2012.37.3.117 ◽

2012 ◽

Vol 37 (3) ◽

pp. 117-134

Author(s):

Hae-Churl Park ◽

Bong-Hyun Ahn

Keyword(s):

Supply Chain ◽

Transaction Models ◽

Wholesale Pricing

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Dynamic vs. Static Wholesale Pricing Strategies in a Dual-Channel Green Supply Chain

Complexity ◽

10.1155/2019/8497070 ◽

2019 ◽

Vol 2019 ◽

pp. 1-14 ◽

Cited By ~ 7

Author(s):

Yongzhao Wang ◽

Xiaojie Sun

Keyword(s):

Energy Efficiency ◽

Supply Chain ◽

High Energy ◽

Pricing Strategy ◽

Green Supply Chain ◽

Green Product ◽

Pricing Strategies ◽

Direct Channel ◽

Dual Channel ◽

Wholesale Pricing

With the improvement of social environmental awareness, the dual-channel green product sales mode has been widely used by many manufacturing firms. In this paper, we consider a dual-channel green supply chain where one manufacturer produces a green product and sells it through one retail channel and its own direct channel. Consumers in the two channels have different perceptions of the product energy efficiency level due to different purchasing experiences. The product energy efficiency level evolves over time and is characterized as a dynamic variable. By developing and solving the Stackelberg differential game problems under the dynamic and static wholesale pricing strategies, respectively, we obtain the main results in this paper. First, the manufacturer has more incentives to invest in green innovation when more consumers buy the green product through the direct channel. Second, the manufacturer prefers to adopt the dynamic wholesale pricing strategy in most cases and prefers the static one only when the consumers in both channels have relatively high energy efficiency perceptions. By introducing the transfer payment contract, we show that the static wholesale pricing strategy may be the better choice, which leads to a win-win outcome for both members. Finally, sensitivity analysis further provides some managerial insights and verifies the robustness of the results.

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Strategic Wholesale Pricing and Commonality Strategy in a Supply Chain with Quality Segmentation

Mathematical Problems in Engineering ◽

10.1155/2015/320219 ◽

2015 ◽

Vol 2015 ◽

pp. 1-13 ◽

Cited By ~ 1

Author(s):

Tiantian Xu ◽

Tiaojun Xiao ◽

Chen Tian

Keyword(s):

Supply Chain ◽

Production Cost ◽

Wholesale Price ◽

High Quality ◽

Unit Production Cost ◽

Pricing Decision ◽

First Mover Advantage ◽

The Common ◽

Wholesale Pricing

We develop two game models of a one-supplier and one-manufacturer supply chain to investigate the supplier’s strategic wholesale pricing decision and the manufacturer’s commonality strategy. The manufacturer has three commonality strategies for the high-end and low-end products: common high-quality component, common low-quality component, and dedicated components. We consider both wholesale price first scenario and commonality strategy first scenario. Under the wholesale price first scenario, we identify the range of each commonality strategy and find that (i) the common low-quality component strategy is harmful to the supplier; (ii) if the quality of low-quality component and the unit production cost of high-quality component are sufficiently low, the supplier induces the common high-quality component strategy by strategically decreasing the unit wholesale price of high-quality component, while if they are sufficiently high, the supplier induces the dedicated components strategy by increasing the unit wholesale price of high-quality component and decreasing that of low-quality one. Under the commonality strategy first scenario, the common low-quality component strategy may exist. By comparing the two scenarios, we find that (i) if the unit production cost of low-quality component is medium, the equilibrium outcomes under both scenarios are identical; (ii) there exists a first-mover advantage for the two players.

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CHARACTERISTICS OF THE GREEN SUPPLY CHAIN COORDINATION: THEORETICAL CONTRIBUTION TO USE THE WHOLESALE PRICING CONTRACT IN THE GREEN SUPPLY CHAIN

Oradea Journal of Business and Economics ◽

10.47535/1991ojbe104 ◽

2020 ◽

Vol 5 (Special) ◽

pp. 135-143

Author(s):

Tamas Faludi

Keyword(s):

Supply Chain ◽

Supply Chains ◽

Environmental Protection ◽

Supply Chain Coordination ◽

Green Supply Chain ◽

Theoretical Contribution ◽

The Difference ◽

A Chain ◽

Green Supply Chains ◽

Wholesale Pricing

Because of the eco-consciousness and the environmental protection companies become ’green’, therefore many green supply chains are realized in the business sphere. Companies of green supply chain take care on the environmental protection. These companies try to decrease the pollution, so they implement some eco-conscious processes. The green supply chains contain these companies. The biggest problem is the coordination of these chains. Nowadays, supply chains have many members, so the cooperation is getting more and more difficult. It could be a potential good solution, if the chain members use the different contract types to coordinate the chain. Contract tries to handle the inequality between the chain members and gives a framework to the cooperation of chain members. This paper introduces the wholesale pricing contract, which can be used in the case of green supply chain and its different settings effectively. The wholesale pricing contract is one of the traditional contract types but it produces different performance in the case of centralized and decentralized setting. Centralized setting has a chain leader – this member operates and coordinates the whole chain and defines common goals for the members. In decentralized setting the members define their own goals and they act in accordance with their own interest. A simulation with numerical example is also included to represent the difference between the two settings.

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Competition and Coordination in a Fashion Supply Chain with Wholesale Pricing Schemes

Fashion Supply Chain Management - Advances in Logistics, Operations, and Management Science ◽

10.4018/978-1-60960-756-2.ch003 ◽

2011 ◽

pp. 42-73 ◽

Cited By ~ 3

Author(s):

Jian Huang ◽

Mingming Leng ◽

Liping Liang

Keyword(s):

Supply Chain ◽

Equilibrium Solution ◽

Stochastic Game ◽

Supply Chain Coordination ◽

Infinite Horizon ◽

Wholesale Price ◽

Retail Price ◽

Pricing Scheme ◽

Stock Policy ◽

Wholesale Pricing

This chapter considers a two-echelon supply chain where a supplier determines his production quantity and a retailer chooses her order size and retail price for each period in an infinite horizon. Under a price-discount sharing (PDS) scheme, the supplier’s wholesale price linearly depends on the retail price. We develop a stochastic game in which these two supply chain members maximize their discounted profits. We show that a unique Nash equilibrium solution exists for each period, and over the infinite horizon the supplier chooses a stationary base stock policy whereas the retailer’s equilibrium solution could be non-stationary. Next, we investigate the problem of whether or not a wholesale pricing scheme can coordinate the supplier and the retailer, and derive the conditions for supply chain coordination. Moreover, we use Nash arbitration scheme to allocate the system-wide profit between the supplier and the retailer.

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Wholesale-retail pricing strategies under market risk and uncertain demand in supply chain using evolutionary game theory

Kybernetes ◽

10.1108/k-02-2017-0053 ◽

2018 ◽

Vol 47 (6) ◽

pp. 1178-1201 ◽

Cited By ~ 5

Author(s):

Ashkan Hafezalkotob ◽

Reza Mahmoudi ◽

Elham Hajisami ◽

Hui Ming Wee

Keyword(s):

Game Theory ◽

Supply Chain ◽

Evolutionary Game Theory ◽

Evolutionary Game ◽

Retail Price ◽

Risk Averse ◽

Content Type ◽

Risk Neutral ◽

Wholesale Pricing

Purpose Nowadays, uncertainty in market demand poses considerable risk to the retailers that supply the market. On the other hand, the risk-averse behaviors of retailers toward risk may have evolved over time. Considering a supply chain including a manufacturer and a population of retailers, the authors intend to investigate how the population of retailers tends to evolve toward risk-averse behavior. Moreover, this study aims to evaluate the effects of wholesale-retail price of manufacturer on evolutionary stable strategy (ESS) of the retailers. Design/methodology/approach Due to market uncertainty, a supply chain with a population of risk-averse and risk-neutral retailers was investigated. The wholesale pricing strategy is determined by a manufacturer acting as a leader, while retailers who make order quantity decisions act as followers. An integrated Cournot duopoly equilibrium and evolutionary game theory (EGT) approach has been used to model this situation. Findings A numerical real-world case study using Iran Khodro Company is analyzed by applying the proposed EGT approach. The study provides managerial insights to the manufacturer as well as retailers in developing their strategies. Results showed that risk behavior of retailers significantly affects optimal wholesale/retail price, profits and ESS. In the long term, the retailers tend to have a risk-neutral behavior to gain more profit. In the short term, if a retailer choses risk-averse strategy, in the long term, it will change its strategy to obtain more profit and remain in the competitive market. Originality/value The contributions in this research are fourfold. First, ESS concept to investigate the risk-averse or risk-neutral attitudes of the retailers was used. Second, the uncertain risk behavior of the competing retailers was considered. Third, the effect of varying wholesale pricing was investigated. Fourth, the equilibrium wholesale and retail prices have been obtained by considering uncertainty demand and risk.

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