 Target pricing: Demand-side versus supply-side approachesHongmin Li, Yimin Wang, Rui Yin, Thomas J. Kull and Thomas Y. Choi International Journal of Production Economics, 2012, vol. 136, issue 1, 172-184 Abstract: The practice of target pricing has been a key factor in the success of Japanese manufacturers. In the more commonly known demand-side approach, the target price for the supplier equals the manufacturer's market price less a percent margin for the manufacturer but no cost-improvement expenses are shared. In the supply-side approach, cost-improvement expenses are shared and the target price equals the supplier's cost plus a percent margin for the supplier. Using a general oligopoly and Cournot duopoly models, we characterize the equilibrium and optimal policy for each approach under various conditions. We find that sharing cost-reduction expenses allows the manufacturer using the supply-side approach to attain competitive advantage in the form of increased market share and higher profit, particularly in industrial conditions where margins are thin and price sensitivities are high. Keywords: Target pricing; Cost-improvement sharing; Competing supply chains; Cournot duopoly (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:136:y:2012:i:1:p:172-184 DOI: 10.1016/j.ijpe.2011.10.002 Access Statistics for this article International Journal of Production Economics is currently edited by Stefan Minner More articles in International Journal of Production Economics from Elsevier |
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