Benefits of partial myopia in a durable product supply chain considering pricing and advertising

Fuxiao Lu, Guowei Liu, Jianxiong Zhang () and Wansheng Tang
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Fuxiao Lu: Tianjin University
Guowei Liu: Tianjin University
Jianxiong Zhang: Tianjin University
Wansheng Tang: Tianjin University

Journal of the Operational Research Society, 2016, vol. 67, issue 10, 1309-1324

Abstract: Abstract Consider a bilateral monopoly supply chain where a manufacturer distributes a durable product through a retailer to end consumers. This paper develops a differential game in which the manufacturer determines the advertising and the wholesale price while the retailer sets the retail price. Channel members are partially myopic when they only consider goodwill dynamics and disregard sales evolution. We derive and compare partially myopic and forward-looking strategies with the following observations: First, under decentralized scenario, partially myopic channel members get higher profits than the forward-looking ones, while the opposite result occurs in centralized scenario. Second, when channel members are partially myopic, the distribution channel can benefit from the strategic decentralization.

Keywords: durable product; partial myopia; advertising; dynamic pricing; differential game (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/jors.2016.27

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