Stability of Equilibrium Prices in a Dynamic Duopoly Bertrand Game with Asymmetric Information and Cluster Spillovers

Bounded rationality, asymmetric information and spillover effects are widespread in the economic market, and had been studied extensively in oligopoly games, but few references discussed incomplete information in a duopoly market with rationality expectations. Considering the positive externalities brought by the spillover effect between enterprises in a cluster, a duopoly Bertrand game with bounded rationality and asymmetric information is proposed in this paper. In our model, a firm with private information, high or low marginal cost, is introduced. Interestingly, our theoretical analysis reveals that: (1) In a dynamic duopoly Bertrand game with perfect rationality and asymmetric information, the equilibrium price is positively correlated with product substitution rate and the probability of a high marginal cost, while it is negatively correlated with the cluster spillover. (2) In a dynamic duopoly Bertrand game with asymmetric information and adaptive expectation adopted by both firms, the Nash equilibrium prices are always asymptotically stable. (3) In a dynamic duopoly Bertrand game with heterogenous expectation and asymmetric information, where two firms use adaptive expectation and boundedly rational expectation respectively, the Nash equilibrium prices are locally stable under certain conditions. Furthermore, results indicate that, high product substitution rate or large probability of high marginal cost for firm 2 with private information may make the market price unstable, bifurcating or even falling into chaos, while high technology spillover is conducive to stabilize the market by contrast. It is also shown that the chaos can be controlled by a hybrid control strategy with the state variables feedback and parameter variation. Our research has an important theoretical and practical significance to the price competition in oligopoly markets.

Pricing strategy and product substitution of bullwhip effect in dual parallel supply chain: aggravation or mitigation?

The bullwhip effect (BE) affects not only the revenue of the retailer but also the revenue of the manufacture. Thus, a lot of retailers and manufacturers aim to attenuate the negative impact of the BE. In this research, two parallel supply chains distributing two substitutable products with price-sensitive demands are considered, the order-up-to inventory policy, as well as the MMSE forecasting method, are employed by retailers in these chains. The retailer’s price-setting follows the first-order vector autoregressive process, suggesting that its pricing decision depends on its previous price as well as its rival’s price, owing to the BE. The analytical expression of the BE is calculated by the statistical method. Besides, the effects of pricing strategy and product substitution on the BE are studied through simulation. A conclusion can be drawn that the BE of the two parallel supply chains will be affected by lead time, product substitution rate, and pricing coefficient. Of particular interest is that the BE can be efficiently alleviated by adopting a price strategy with many correlations and a small coefficient of autocorrelation.

Potential of renewable sources in Ukraine

Bearing in mind a serious dependence of Ukraine on the import of oil products, it is of great significance for Ukraine to develop own manufacture and to increase the share of oil product substitution with biofuel. It is not possible to develop biofuel market without solving a number of economic and organizational problems, which is why it is expedient to introduce financial-economic stimuli for biofuel producers and to build a stable demand for alternative kinds of fuel. In Ukraine the manufacture of alternative fuels almost terminated, however the solution of the problem of biofuel manufacture will depend on the coordination of joint actions of the state, participants of market relations and the development of the system of measures aimed at the creation of pre-conditions to enhance a competitive biofuel market in Ukraine, taking into consideration foreign experience and current tendencies of the manufacture and use of the alternative energy sources.

Commercial afforestation can deliver effective climate change mitigation under multiple decarbonisation pathways

Afforestation is an important greenhouse gas (GHG) mitigation strategy but the efficacy of commercial forestry is disputed. Here, we calculate the potential GHG mitigation of a UK national planting strategy of 30,000 ha yr−1 from 2020 to 2050, using dynamic life cycle assessment. What-if scenarios vary: conifer-broadleaf composition, harvesting, product breakouts, and decarbonisation of substituted energy and materials, to estimate 100-year GHG mitigation. Here we find forest growth rate is the most important determinant of cumulative mitigation by 2120, irrespective of whether trees are harvested. A national planting strategy of commercial forest could mitigate 1.64 Pg CO2e by 2120 (cumulative), compared with 0.54–1.72 Pg CO2e for planting only conservation forests, depending on species composition. Even after heavy discounting of future product substitution credits based on industrial decarbonisation projections, GHG mitigation from harvested stands typically surpasses unharvested stands. Commercial afforestation can deliver effective GHG mitigation that is robust to future decarbonisation pathways and wood uses.

Effects of Parallel Importation and Power Structures on Price Competition in Duopolistic Supply Chains

Multinational manufacturers (MNMs) achieve significant gains from product quality and reputation in entering emerging markets while facing many operational risks, such as parallel importation (PI) and market power structures. This paper focuses on a duopolistic supply chain consisting of one MNM and one local manufacturer (LM) in an emerging market with low willingness-to-pay (WTP). Within the game analytical framework, we consider different market power structures and investigate the impact of PI on the manufacturers’ price competition, and we further discuss the MNM’s countermeasures in high and low WTP markets. We find that PI does not occur when the WTP ratio is below the threshold or the transaction cost is high. Power structures significantly affect the participant’s profitability, the LM’s gains are maximized if the MNM fully dominates the market, and the MNM loses the minimum if the LM exclusively rules the market. When in codominant structure, the parallel importer achieves maximum gains while the MNM’s profits rise in the market WTP ratio interval. PI activities boost the benefits for the LM and the parallel importer, whereas increasing transaction costs diminish those effects and promote the MNM’s profitability. PI promotes or deters price competition in duopolistic supply chains depending on power structures. In addition, increasing either the level of product substitution or quality perception restrains PI and improves the LM’s earnings, but the latter expands the MNM’s losses.

PENGENDALIAN PERSEDIAAN PROBABILISTIK PRODUK SUBSTITUSI DENGAN PERMINTAAN SEBAGAI FUNGSI HARGA

Kamara Living merupakan suatu unit usaha yang bergerak dalam penjualan kebutuhan sehari-hari. Salah satu produk yang populer adalah sarung bantal. Sarung bantal yang ditawarkan memiliki beberapa desain motif dan jenis yang berbeda. Permintaan akan produk sarung bantal tidak menentu antara satu desain dengan desain yang lain. Ketika desain tertentu persediaannya habis, perusahaan akan menawarkan desain lain dari jenis kain yang sama. Jika konsumen tidak bersedia maka terjadi kehilangan penjualan. Ketika persediaan berlebih, perusahaan akan memberikan harga promosi untuk mendongkrak tingkat penjualannya. Jika ini dibiarkan terus-menerus, tentu saja perusahaan akan mengalami penurunan keuntungan. Pada makalah ini dikembangkan model persediaan dengan mempertimbangkan produk substitusi dengan permintaan sebagai fungsi harga yang bertujuan untuk meminimasi total biaya persediaan. Penyelesaian model yang dilakukan mampu menghasilkan solusi kuantitas pemesanan dan titik pemesanan yang optimal. Validasi model dilakukan dengan membandingkan hasil dari model yang dikembangkan terhadap kondisi riil. Selain itu juga dilakukan analisis sensitivitas terhadap parameter-parameter yang berpengaruh. Abstract[Product-substitution Inventory Model with Demand depend on Price] Kamara Living is a business unit engaged in selling daily stuff. One popular product is pillowcases. The pillow cover offered has several different motif designs and types. The demand for pillowcases is uncertain between one design and another. When a stockout occurs for a particular design, the company will offer another design of the same type of fabric. If consumers are not willing, there will be lost sales. When there is overstock, the company will provide promotional prices to increase sales levels. If this is allowed to continue, of course the company will experience a decline in profits. In this paper, an inventory model is developed by considering substitute products with demand as a price function that aims to minimize the total cost of inventory. Completion of the model carried out is able to produce optimal order quantity and order point solutions. Model validation is done by comparing the results of the models developed against real conditions. In addition, a sensitivity analysis was carried out on the influential parameters.Keywords: Inventory Models; Product Substitution; Demand Depend on Price