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Manufacturer's pricing strategy for supply chain with warranty period-dependent demand

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  • Chen, Xu
  • Li, Ling
  • Zhou, Ming

Abstract

This article presents a review of the issues associated with a manufacturer's pricing strategies in a two-echelon supply chain that comprises one manufacturer and two competing retailers, with warranty period-dependent demands. The manufacturer, as a Stackelberg leader, specifies wholesale prices to two competing retailers who face warranty period-dependent demand and have different sales costs. The manufacturer considers three pricing options: (1) setting the same price for both retailers, while disregarding their difference with regard to sales cost; (2) setting a different price to each retailer on the basis of their sales cost; and (3) setting the same price to both retailers according to the average sales cost of the industry. In this article, the retailers' optimal warranty periods and their optimal profit, manufacturer's optimal wholesale price, and his/her optimal profit associated with different pricing strategies have been derived using the game theory. Our analysis shows that the results for retailers are the same with Strategy 1 or Strategy 3. In addition, we compared the effects of different pricing strategies of the manufacturer on supply chain decisions and profit. We conclude from the results that the manufacturer should either adopt Strategy 2 with symmetrical sales cost information or Strategy 3 if retailers' sales costs are asymmetrical.

Suggested Citation

  • Chen, Xu & Li, Ling & Zhou, Ming, 2012. "Manufacturer's pricing strategy for supply chain with warranty period-dependent demand," Omega, Elsevier, vol. 40(6), pages 807-816.
  • Handle: RePEc:eee:jomega:v:40:y:2012:i:6:p:807-816
    DOI: 10.1016/j.omega.2011.12.010
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Taleizadeh, Ata Allah & Hadadpour, Shirin & Cárdenas-Barrón, Leopoldo Eduardo & Shaikh, Ali Akbar, 2017. "Warranty and price optimization in a competitive duopoly supply chain with parallel importation," International Journal of Production Economics, Elsevier, vol. 185(C), pages 76-88.
    2. Xie, Yue & Tai, Allen H. & Ching, Wai-Ki & Siu, Tak-Kuen, 2016. "Pricing strategy for a two-echelon supply chain with optimized return effort level," International Journal of Production Economics, Elsevier, vol. 182(C), pages 185-195.
    3. Wu, Shaomin, 2014. "Warranty return policies for products with unknown claim causes and their optimisation," International Journal of Production Economics, Elsevier, vol. 156(C), pages 52-61.
    4. Luo, Zheng & Chen, Xu & Chen, Jing & Wang, Xiaojun, 2017. "Optimal pricing policies for differentiated brands under different supply chain power structures," European Journal of Operational Research, Elsevier, vol. 259(2), pages 437-451.
    5. Rezapour, Shabnam & Allen, Janet K. & Mistree, Farrokh, 2016. "Reliable flow in forward and after-sales supply chains considering propagated uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 409-436.
    6. Chen, Xu & Hao, Gang & Li, Ling, 2014. "Channel coordination with a loss-averse retailer and option contracts," International Journal of Production Economics, Elsevier, vol. 150(C), pages 52-57.
    7. Liu, Zhongyi & Chen, Lihua & Li, Ling & Zhai, Xin, 2014. "Risk hedging in a supply chain: Option vs. price discount," International Journal of Production Economics, Elsevier, vol. 151(C), pages 112-120.
    8. Chen, Xu & Wang, Xiaojun, 2015. "Free or bundled: Channel selection decisions under different power structures," Omega, Elsevier, vol. 53(C), pages 11-20.
    9. Chen, Xu & Wang, Xiaojun & Chan, Hing Kai, 2016. "Channel coordination through subsidy contract design in the mobile phone industry," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 97-104.
    10. Jörnsten, Kurt & Lise Nonås, Sigrid & Sandal, Leif & Ubøe, Jan, 2013. "Mixed contracts for the newsvendor problem with real options and discrete demand," Omega, Elsevier, vol. 41(5), pages 809-819.
    11. Rezapour, Shabnam & Allen, Janet K. & Mistree, Farrokh, 2016. "Reliable product-service supply chains for repairable products," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 95(C), pages 299-321.
    12. He, Yuanjie, 2013. "Sequential price and quantity decisions under supply and demand risks," International Journal of Production Economics, Elsevier, vol. 141(2), pages 541-551.

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