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The effects of price subsidy and fairness concern on pricing and benefits of take-away supply chain

Author

Listed:
  • Hui Zhang

    (Fujian Agriculture and Forestry University)

  • Kai Luo

    (Fujian Agriculture and Forestry University)

  • Guanqun Ni

    (Fujian Agriculture and Forestry University)

Abstract

In this paper, from the perspective of game theory, we study the impact of price subsidy and fairness concern on the pricing strategies and benefits of members in the take-away industry. In the single-channel supply chain, we build a Stackelberg game model between the take-away platform and the restaurant for the online take-away business. By comparing and analyzing the product pricing and revenue in the cases of no price subsidy and price subsidy, we obtain the optimal pricing strategy for both parties. In the dual-channel supply chain, we explore the benefits of supply chain members under the combined effects of fairness concern and price subsidy. Under the single channel price subsidy model, we find that restaurant always raises prices, and the price increase is directly proportional to the subsidy intensity. Such a proper price increase always brings more benefits to both parties. Under the dual-channel model, consumer fairness concern may curb the price increase behavior of restaurants. Regardless of the model, in the long term, the optimal subsidy of the platform will decrease with the expansion of the online take-away market.

Suggested Citation

  • Hui Zhang & Kai Luo & Guanqun Ni, 2022. "The effects of price subsidy and fairness concern on pricing and benefits of take-away supply chain," Journal of Combinatorial Optimization, Springer, vol. 43(5), pages 1106-1124, July.
    • Handle: RePEc:spr:jcomop:v:43:y:2022:i:5:d:10.1007_s10878-020-00625-w
    DOI: 10.1007/s10878-020-00625-w
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    References listed on IDEAS

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