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A game theoretic approach to coordinate price promotion and advertising policies with reference price effects in a two-echelon supply chain

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  • Malekian, Yaser
  • Rasti-Barzoki, Morteza

Abstract

In this paper, the price promotion and manufacturer national advertising are investigated in a manufacturer-retailer supply chain with reference price effects of consumers taken into account. A centralized game is studied followed by the two Stackelberg games of “consumer price promotion†and “retailer-consumer price promotion†. In the Stackelberg games, the manufacturer plays the role of the leader and the retailer is the follower. The results obtained indicate that the reference price and the memory factor of the costumer have profound effects on the profits of supply chain members, optimal depth of price promotion and advertising level. If sensitivity of the consumer to the gap between the price and the reference price is large enough, reference price has a considerable effect on the consumer's tendency to buy and the price promotion increases channel profits. Also, it is observed that the memory of the costumer has a positive effect on profits of supply chain members. Moreover, it is also shown that there exists an indifference point for the memory factor at which the reference price impact factor has no effect on the optimal values of the decision variables. Finally, it is observed that channel efficiency is improved by advertising.

Suggested Citation

  • Malekian, Yaser & Rasti-Barzoki, Morteza, 2019. "A game theoretic approach to coordinate price promotion and advertising policies with reference price effects in a two-echelon supply chain," Journal of Retailing and Consumer Services, Elsevier, vol. 51(C), pages 114-128.
    • Handle: RePEc:eee:joreco:v:51:y:2019:i:c:p:114-128
    DOI: 10.1016/j.jretconser.2019.05.028
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    References listed on IDEAS

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    7. Mao, Zhixin & Duan, Yongrui & Liu, Wenxia, 2023. "Consumers’ choice of private label considering reference price and moderating effect," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    8. Brojeswar Pal & Shib Sankar Sana, 2022. "Game-theoretic analysis in an environment-friendly competitive closed-loop dual-channel supply chain with recycling," Operations Management Research, Springer, vol. 15(3), pages 627-646, December.
    9. Ghobadi, Somayeh Najafi- & Bagherinejad, Jafar & Taleizadeh, Ata Allah, 2021. "A two-generation new product model by considering forward-looking customers: Dynamic pricing and advertising optimization," Journal of Retailing and Consumer Services, Elsevier, vol. 63(C).
    10. Khorshidvand, Behrooz & Soleimani, Hamed & Sibdari, Soheil & Seyyed Esfahani, Mir Mehdi, 2021. "Revenue management in a multi-level multi-channel supply chain considering pricing, greening, and advertising decisions," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    11. Syed Asif Raza, 2022. "A bibliometric analysis of pricing models in supply chain," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 228-251, April.
    12. Biswajit Sarkar & Bikash Koli Dey & Mitali Sarkar & Ali AlArjani, 2021. "A Sustainable Online-to-Offline (O2O) Retailing Strategy for a Supply Chain Management under Controllable Lead Time and Variable Demand," Sustainability, MDPI, vol. 13(4), pages 1-26, February.
    13. Assarzadegan, Parisa & Hejazi, Seyed Reza, 2021. "A game theoretic approach for analyzing the competition between national and store brands by considering store loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    14. Sarkar, Biswajit & Kar, Sumi & Basu, Kajla & Seo, Yong Won, 2023. "Is the online-offline buy-online-pickup-in-store retail strategy best among other product delivery strategies under variable lead time?," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).
    15. Ma, Shigui & He, Yong & Gu, Ran, 2021. "Joint service, pricing and advertising strategies with tourists’ green tourism experience in a tourism supply chain," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
    16. Khosroshahi, Hossein & Dimitrov, Stanko & Hejazi, Seyed Reza, 2021. "Pricing, greening, and transparency decisions considering the impact of government subsidies and CSR behavior in supply chain decisions," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    17. Huang, Zongsheng & Bai, Peijie, 2021. "Dynamic cooperative promotion in the presence of consumer reference effect with competing retailers," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).

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