Abstract
In this paper, we extend price wars to supply chain networks (SCNs), focusing on how price wars affect the performance of SCNs and how to contain a price war. We propose a computational model in which the price competition is modelled as a multistage evolutionary prisoner’s dilemma game between business-related neighbors in each stage of the SCN, and the temptation to defect of the prisoner’s dilemma game is modelled as a function of the quotation price, which couples the price competition and the dynamic of the SCN. It is found that the price defectors’ exposure rate is the key factor causing price war of the SCN, and only a large proportion of firms in a closely related industry join the price alliance, and the price war in the SCN can be contained effectively.
Highlights
In order to fight for customers and market shares, cooperation and competition are common practices among firms in SCNs, and price competition is the most commonly used means of market competition [1,2,3]. e expansion and extension of price competition often lead to repeated cutting of prices among competitors; one competitor lowers its price, others lower their prices to match, which eventually results in a price war
It should be noted that the network structure of the SCN in our model is fixed from the outset and neighbors in the SCN never disconnect or reconnect by price competition and dynamic of the SCN
Price wars are extended to SCNs and modelled as multistage price-based evolutionary prisoner’s dilemma game (PDG)
Summary
In order to fight for customers and market shares, cooperation and competition are common practices among firms in SCNs, and price competition is the most commonly used means of market competition [1,2,3]. e expansion and extension of price competition often lead to repeated cutting of prices among competitors; one competitor lowers its price, others lower their prices to match, which eventually results in a price war. (4) Forecast the demand in the time step and adjust the order size considering the current inventory or backlogged orders (5) Receive quotations from all the candidate firms sent in the previous time step, select the supplier and place an order (6) Play price competition games with their neighbors and send the quotation for the time step to their potential customers (7) Calculate their sales revenue and inventory cost and update their total capital. We take the one-period quotation transmission delay into account, i.e., the quotation sent in time step t − 1 is received by the potential customers in time step t; our model does not consider middlemen’s production cost and payment delay, which means that consumers and middlemen pay their suppliers immediately after receiving shipments. Where l indicates that firm i only takes l latest past actual demand into consideration when it forecasts
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
