A Dynamic Pricing Model for Postponement Supply Chain: The Bi-level Programming Approach

Abstract

The paper proposes a dynamic pricing model based on bi-level programming approach: firstly, we establish a two-stage distributed control model for postponement supply chain, which is the basis of the pricing model. Then, according to the pricing mechanism, we find that there is Stackelberg game feature in the process. Aimed at the feature, we propose a dynamic bi-level programming model, taking the centered warehousing & manufacturing point (CWMP) as the leader, and hence, the model is calculated and verified using the investigation data. We take chaos coverage hunting algorithm to solve the model, based on its features. Research shows: the dynamic pricing model is helpful to obtain the maximum profit of the whole supply chain, which is under the assumption of a two-stage distributed control system; we obtain steady equilibrium prices (EP), which verify the efficiency of the decision-making model. The pricing model is proved to be useful to give reasonable prices of goods traded on postponement supply chain, and it is also an effective decision-making tool of supply chain coordination.