Pricing and Warranty Decisions of Substitutable Products for a Fuzzy Two-Echelon Supply Chain

Yongzhao Wang

doi:10.1155/2017/8476516

Abstract

This paper considers the optimal decisions of pricing and warranty level for substitutable products in a fuzzy supply chain environment, where the consumer demands, manufacturing costs, and warranty costs are characterized as fuzzy variables. Expected value manufacturer-leader Stackelberg models and two chance-constrained programming models, that is, theλ-optimistic andλ-pessimistic manufacturer-leader Stackelberg models, are established. The corresponding closed-form solutions are obtained by using the game-theoretical approach and fuzzy theory. Finally, numerical examples are presented to illustrate the effectiveness of the models and to provide managerial insights for decision makers. The results show that it would be beneficial for the whole supply chain when the warranty services are introduced into the market, and the firm which provides the warranty service has the advantage in holding more dominant position.

Highlights

Price is the most important and direct criterion that consumers use to evaluate a product at the market
This paper considers the optimal decisions of pricing and warranty level for substitutable products in a fuzzy supply chain environment, where the consumer demands, manufacturing costs, and warranty costs are characterized as fuzzy variables
Differing from those of prior studies, by considering a fuzzy supply chain where two manufacturers produce two substitutable products and sell them to a retailer who sells them to the end consumers, this paper studies the optimal wholesale prices, warranty levels, and retail prices’ decisions

Summary

Introduction

Price is the most important and direct criterion that consumers use to evaluate a product at the market. In recent supply chain studies, Zhou et al [17] established the expected value models as well as chance-constrained programming models to determine the pricing strategies for the retailer and the manufacturer. Differing from those of prior studies, by considering a fuzzy supply chain where two manufacturers produce two substitutable products and sell them to a retailer who sells them to the end consumers, this paper studies the optimal wholesale prices, warranty levels, and retail prices’ decisions.

Problem Description

Fuzzy Models and Main Results

Numerical Example

Findings

Conclusion