 Manufacturer's pricing strategy in a two-level supply chain with competing retailers and advertising cost dependent demandB.C. Giri and S. Sharma Economic Modelling, 2014, vol. 38, issue C, 102-111 Abstract: The paper studies a two-echelon supply chain comprising one manufacturer and two competing retailers with advertising cost dependent demand. The manufacturer acts as the Stackelberg leader who specifies wholesale price for each retailer. The two retailers compete with each other in advertising and they have different sales costs. The manufacturer uses one of the following two pricing strategies: (i) setting the same wholesale price for both the retailers irrespective of the difference in their sales costs; (ii) setting different wholesale prices for the retailers depending on their sales costs. Two models are developed. In the first model, the manufacturer shares a fraction of each retailer's advertising cost while in the second model, the manufacturer does not share any retailer's advertising expenses. In both the models, we derive the retailers' and manufacturer's optimal strategies. A numerical example is given to illustrate the theoretical results developed in each model. Computational results show that it is always beneficial for the manufacturer to adopt different wholesale pricing strategy for the retailers. Keywords: Supply chain; Advertising cost dependent demand; Pricing strategy (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:ecmode:v:38:y:2014:i:c:p:102-111 DOI: 10.1016/j.econmod.2013.11.005 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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