Modelling decision behaviours in pricing game of closed-loop supply chains

Xiaohua Han, Bo Feng and Xujin Pu
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Xiaohua Han: School of Management, Guangdong University of Technology, Guangzhou, China
Bo Feng: School of Business Administration, South China University of Technology, Guangzhou, China
Xujin Pu: School of Business, Jiangnan University, Wuxi, China

Journal of the Operational Research Society, 2015, vol. 66, issue 6, 1052-1060

Abstract: This paper experimentally and analytically studies pricing decisions in closed-loop supply chains. Experimental results show considerable deviations from theoretical predictions by traditional pricing models. Moreover, social relationships can affect decision results, and double marginalization is reduced in closed-loop supply chains. For in-depth analysis of experimental results, we further extended the quantal response equilibrium model by incorporating the fairness concerns of both the manufacturer and retailer. The analysis results of the developed model suggest that participants exhibit bounded rationality and fairness concerns when they make decisions. Social relationships can also influence the degree of fairness concerns.

Date: 2015
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