Unlocking the advantages of differential pricing: A two‐period model integrating consumer identifiable information and advertising effort

Abstract

To explore the potential benefits of differentiated pricing compared to uniform pricing within supply chain networks, we constructed a two‐period dynamic pricing model for products in this research. In our scenario, the manufacturer produces the original product during the initial period and introduces a new‐generation product in the subsequent period. Simultaneously, the retailer handles the original product during the initial period and transitions to selling the new‐generation product boosted by advertising efforts in the following period. Our analysis of the proposed models yielded three primary insights. First, the adoption of a differentiated pricing strategy may not universally favor supply chain participants. Second, the implementation of a differentiated pricing approach does not necessarily equate to higher wholesale and retail prices in each period. Finally, to optimize overall profits and attain mutually beneficial outcomes, it is imperative for supply chain stakeholder to share decision‐making information. Furthermore, we offer managerial recommendations based on these findings.