Pricing models based on Bertrand game under Dual-channel Environment

Abstract

Models of pricing based on Bertrand competition between manufacturer and distributor are discussed under Dual-channel Environment. A system consisting of a manufacturer, a distributor and customers is considered, in which the manufacturer can sell products to the distributor, who, in turn, sells the products to customers through traditional channel, or the manufacturer can transact directly with the customers in an electronic manner. In the Bertrand game setting, the manufacturer and the retailer decide simultaneously the prices of products.The manufacturer and the retailer establish models with the respective objection of maximizing expected profit, and transaction cost is considered in these models. The manufacturer regards the price of products sold to retailer through traditional and online channels as decision variables, while the retailer's decision variable is the price of products sold to customers. At last, the numerical examples are given to show application of pricing model based on Bertrand game.