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Pricing decisions for three-echelon supply chain with advertising and quality effort-dependent fuzzy demand

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  • Rohit Gupta
  • Indranil Biswas
  • Sushil Kumar

Abstract

Simultaneous influence of market power structure, advertising and quality efforts on the optimal pricing decisions and performance of a multi-echelon supply chain under uncertainty have received scant attention in the literature. We focus on this gap by examining a serial decentralised three-echelon supply chain consisting of a supplier, a manufacturer and a retailer. The uncertainty associated with customer demand, marginal production costs and effort costs is expressed as linguistic or fuzzy variables. We analyse centralised supply chain to obtain all benchmark parameters. We investigate four decentralised supply chain cases through fuzzy game theoretic approach. We compare among three Stackelberg games with various supply chain leaderships and a vertical Nash. Our key findings are as follows. First, the manufacturer puts least quality effort while retailer puts least advertising effort when they act as Stackelberg leader in a three-echelon supply chain. Second, supplier's per unit price is governed by the channel leadership in three-echelon supply chain while retail prices are less affected by the leadership. We investigate the impact of fuzzy degree of quality and advertising sensitivity on optimal profit distribution among agents. We present numerical analysis to illustrate the importance of the derived theoretical results and discuss additional managerial insights.

Suggested Citation

  • Rohit Gupta & Indranil Biswas & Sushil Kumar, 2019. "Pricing decisions for three-echelon supply chain with advertising and quality effort-dependent fuzzy demand," International Journal of Production Research, Taylor & Francis Journals, vol. 57(9), pages 2715-2731, May.
    • Handle: RePEc:taf:tprsxx:v:57:y:2019:i:9:p:2715-2731
    DOI: 10.1080/00207543.2018.1547434
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    Cited by:

    1. Zongbao Zou & Cong Wang & Qinjia Zhong, 2022. "How Does Retailer-Oriented Remanufacturing Affect the OEM’s Quality Choice?," Sustainability, MDPI, vol. 14(13), pages 1-21, June.
    2. Junyi Zhong & Jiazhen Huo, 2022. "Impacts of Power Structure on Introduction of Green Store Brand," Sustainability, MDPI, vol. 14(19), pages 1-33, September.
    3. Zhou, Wei & Zhang, Keang & Zhang, Ying & Duan, Yunlong, 2021. "Operation strategies with respect to insurance subsidy optimization for online retailers dealing with large items," International Journal of Production Economics, Elsevier, vol. 232(C).
    4. Varun Sharma & Alok Raj & Abhishek Chakraborty, 2023. "Analysis of power dynamics in sustainable supply chain under non-linear demand setup," Operations Management Research, Springer, vol. 16(1), pages 18-32, March.
    5. Liu, Mengqi & Liang, Ke & Perera, Sandun & Huang, Rui & Ghose, Sanjoy, 2022. "Game theoretical analysis of service effort timing scheme strategies in dual-channel supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    6. Guan, Zhimin & Ye, Tong & Yin, Rui, 2020. "Channel coordination under Nash bargaining fairness concerns in differential games of goodwill accumulation," European Journal of Operational Research, Elsevier, vol. 285(3), pages 916-930.
    7. 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.

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