Dynamic pricing decision in the two-echelon supply chain with manufacturer's advertising and dominant retailer

Abstract

In a two-echelon supply chain with a manufacturer and a retailer, the dominant retailer can have a centralized control of the supply chain, or is the leader in Stackelberg game in decentralized supply chain, and can coordinate the entire supply chain by controling or influencing the manufacturer's wholesale price. Especially, the manufacturer can increase sales with advertisement, the retail price and advertising not only influence on the current market demand, but also the next period demand. Based on the above, the equilibrium of a two-period dynamic pricing and advertising model is given by a backward induction in decentralized supply chain and centralized supply chain, and the influence of price sensitive coefficient and advertising sensitive coefficient on decision is analyzed. Furthermore, the conditions of supply chain coordination by the wholesale price are gived, some new conclusions are drawn. The results show that the next period decisions lie much on the current period decisions.