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Price promotion with reference price effects in supply chain

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  • Lin, Zhibing

Abstract

We consider the price promotion in a supply chain comprising one manufacturer and one retailer, who take into account the reference price effects of consumers. The problem is analyzed as a manufacturer-lead Stackelberg game. The results indicate that reference price effects could mitigate “double marginalization” effects, and improve the channel efficiency. We also show that the optimal price promotion benefits the manufacturer, retailer and consumers in consumer promotion model. Furthermore, we provide the conditions under which the retailer has an interest in offering price promotion to consumers. Finally, we employ numerical analysis to demonstrate more managerial insights.

Suggested Citation

  • Lin, Zhibing, 2016. "Price promotion with reference price effects in supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 85(C), pages 52-68.
    • Handle: RePEc:eee:transe:v:85:y:2016:i:c:p:52-68
    DOI: 10.1016/j.tre.2015.11.002
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    3. Zhu, Xiaoyan & Jiao, Can & Yuan, Tao, 2019. "Optimal decisions on product reliability, sales and promotion under nonrenewable warranties," Reliability Engineering and System Safety, Elsevier, vol. 192(C).
    4. Martín-Herrán, Guiomar & Sigué, Simon Pierre, 2023. "An integrative framework of cooperative advertising with reference price effects," Journal of Retailing and Consumer Services, Elsevier, vol. 70(C).
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    6. Junhai Ma & Zhanbing Guo, 2017. "Implications for Firms with Limited Information to Take Advantage of Reference Price Effect in Competitive Settings," Complexity, Hindawi, vol. 2017, pages 1-16, June.
    7. Jun Wang & Xianxue Cheng & Xinyu Wang & Hongtao Yang & Shuhua Zhang, 2019. "Myopic versus Farsighted Behaviors in a Low-Carbon Supply Chain with Reference Emission Effects," Complexity, Hindawi, vol. 2019, pages 1-15, February.
    8. Yingdong Tian & Wensheng Yang & Kun Wen & Dawei Zhang, 2023. "Who is better for single and double coupon promotion? Comparison from dual‐channel and two‐period," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2079-2093, June.
    9. Qian Lei & Juan He & Fuling Huang, 2019. "Impacts of Online and Offline Channel Structures on Two-Period Supply Chains with Strategic Consumers," Mathematics, MDPI, vol. 8(1), pages 1-19, December.
    10. Xiaxia Ma & Wenliang Bian & Xiqing Yang & Shengnan Niu & Yongming Cai & Jie Guan & Wenbin Wang, 2022. "Online Retailer’s Contingent Free-Shipping Decisions under Large-Scale Promotions Considering Delayed Delivery," Sustainability, MDPI, vol. 14(17), pages 1-22, August.
    11. Huang, Weixiang & Sang, Qingyuan & Zhou, Wenhui & Zhu, Han, 2024. "Challenge or opportunity? Impact of a two-invoice mechanism on pharmaceutical supply chains with channel promotion," International Journal of Production Economics, Elsevier, vol. 270(C).
    12. Alawneh, Fawzat & Zhang, Guoqing, 2018. "Dual-channel warehouse and inventory management with stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 84-106.
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