Pricing Strategies for Competing Adaptive Retailers Facing Complex Consumer Behavior: Agent-based Model

Heng Du and Tiaojun Xiao
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Heng Du: Center for Behavioral Decision and Control, School of Management and Engineering, Nanjing University, Nanjing 210093, China
Tiaojun Xiao: Center for Behavioral Decision and Control, School of Management and Engineering, Nanjing University, Nanjing 210093, China

International Journal of Information Technology & Decision Making (IJITDM), 2019, vol. 18, issue 06, 1909-1939

Abstract: This paper examines pricing strategies for two adaptive retailers competing on two products in the presence of complex consumer behavior, where consumers own heterogeneous product and store valuations and the number of potential consumers is random. Each retailer can choose one from two pricing strategies: the uniform pricing format (offering the same price for two products) or the differentiated pricing format (offering different prices). Utilizing agent-based model (each retailer is modeled as an autonomous agent with the reinforcement learning behavior), we find that: (i) the differentiated pricing format is not always the optimal choice; (ii) when the uncertainty of one product/store valuation is a little larger than that of the rival, both retailers should adopt uniform pricing. Besides, when wholesale price contract is endogenous, we find that supplier’s pricing behavior can change the impact of the fixed cost on the pricing strategy.

Keywords: Pricing strategy; complex consumer behavior; supply chain management; agent-based model; game theory (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S021962201950038X

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