Cross-price Sensitivity Research Articles

A DUAL-CHANNEL SUPPLY CHAIN MODEL OF COMPLEMENTARY PRODUCTS BY CONSIDERING GREEN MANUFACTURING LEVEL

The development of technology and the internet has encouraged industry players to develop their businesses by adding online sales media, which previously only used offline sales media. By adding online sales media, industry players can expand their markets so they can increase profits. This study aims to modify the DCSC model for complementary products by considering the green manufacturing level to maximize the profit of a system consisting of two manufacturers and one retailer.. Based on the model that has been constructed, the optimal solution is determined so that maximum profits are obtained for each model actor in centralized scenarios. After that, the model is applied and sensitivity analysis of its parameters is carried out. Based on the research results, it appears that the policy that is more profitable for each actor in terms of system benefits is the centralized scenario. Analysis of changes in selling price elasticity values and cross price sensitivity of one of the complementary products sold in two channels influences the increase or decrease in profits of each actor and system profits. However, changes in the value of cross-price sensitivity between two complementary products indicate a decrease in the profits of each actor and the profits of the system. The change in the sensitivity value of the green manufacturing level for each product shows an increase in system profits and retailer profits, where when the sensitivity value of the green manufacturing level of product 1 is greater, the profit of manufacturer 1 is also greater, but the profit of manufacturer 2 is smaller. Conversely, when the green manufacturing level sensitivity value of product 2 becomes greater, the profit of manufacturer 2 also becomes greater, but the profit of manufacturer 1 becomes smaller.

Competitiveness Analysis of Pakistan’s Cotton Yarn Exports Relative to India and USA: A Demand System Application with Focuses on China’s Market

This study employed the revealed comparative advantage (RCA), revealed symmetric comparative advantage (RSCA) and Vollrath’s indices to measure Pakistan’s export competitiveness of cotton yarn in the world. Meanwhile, the country’s export competitiveness is evaluated using the comparative advantage by countries index in China, the world’s largest consumer of cotton yarn and Pakistan’s main export destination. Additionally, linear approximated almost ideal demand systems (LA/AIDS) is employed to anticipate the demand relations for exports of cotton yarn (Pakistan, India and the USA) in the Chinese market over the period 1991–2019. The value of RCA indices greater than one indicates that the country has comparative advantage in exports of cotton yarn in both the global and Chinese market. The findings also revealed that the nation’s comparative advantage position has decreased in global market while improved in the regional market of China. Furthermore, based on the approximation of restricted LA/AIDS model, the results affirmed that the exports of cotton yarn had high own-price sensitivity with negative signs, whereas cross-price sensitivity with positive signs. With regards to Pakistan’s exports, estimates of cross-prices indicate that China’s imports of yarn from Pakistan are substitutable for imports of yarn from India and the USA. In addition, the expenditure elasticity for India and US cotton yarn is greater than one, indicating that China viewed their exports of cotton yarn as quality good. On the other hand, the expenditure elasticity for Pakistan’s is less than one, but close enough to one, which reflects the cut-off point for exports of quality goods. Pakistan, therefore, needs to produce cotton yarn more efficiently by reducing costs and enhancing the reputation of quality to increase exports and market share.

Pricing Decisions and Member Participation Conditions in the Platform Supply Chain with Seasonal Demand: A Game Theory-Based Analysis

In a platform supply chain containing an sharing platform, a retailer, and two upstream factories, we consider the sales of two substitutable products and the constraints on the participation of non-platform members in the game, construct a dynamic game model of the platform supply chain with demand fluctuations due to seasonal changes, and use the inverse induction method to derive the thresholds for the participation of the retailer and factories in the game and the optimal price of each member, analyze the pricing decisions and participation game process among members. Our findings are as follows. (1) The threshold for the retailer to participate in the game during peak season is greater than that in the off-season, while the manufacturer's threshold is the opposite. (2) The platform should reduce commissions during peak season, factories should reduce wholesale prices, and the retailer should increase sales price. (3) The increase in price sensitivity coefficient, inventory cost and production cost are all detrimental to the platform, whereas an increase in the cross-price sensitivity coefficient is usually beneficial. (4) Whether it is the peak season or the off-season, the increase in demand fluctuations is bad for all chain members.

Dual-Channel Supply Chain Financing Operation Strategy Considering Free-Riding Effect under Different Power Structures

This paper considers a dual-channel supply chain consisting of a manufacturer and a capital-constrained retailer, where the retailer makes certain sales efforts and the manufacturer may hitch a ride on the retailer’s sales efforts. Deferred payment and bank loan financing models under Retailer- and Manufacturer-Stackelberg settings are established, respectively. The equilibrium price and sales effort strategies of both sides of the supply chain under two power structures and financing modes are obtained by the backward solution method, and then the influence of free-riding behavior and financing interest rate on equilibrium strategies is explored, as well as how the power structure affects the financing decisions of enterprises. The results show that deferred payment is more conducive to retailers’ sales effort and order volume, which is the optimal financing model for the retailers under each power structure. Power structure affects the initial capital threshold of retailers and the manufacturers’ financing decisions. The impact of free-riding behavior and financing rate on equilibrium prices exists and varies, depending on the power structure and financing model. Numerical simulation results show that manufacturers should give priority to publishing price strategies, while retailers should decide whether to give priority to publishing price strategies according to financing mode and cross-price sensitivity. This paper’s findings can provide valuable guidance for decision-making in financing, price, and sales effort for the capital-constrained dual-channel supply chain.

Stochastic Evolutionary Game Analysis on the Strategy Selection of Green Building Stakeholders from the Perspective of Supply-Demand Subject Populations

In construction industry, the research and development (R&D) and application of green building technologies (GBTs) are crucial to promote the development of green buildings. From the perspective of supply-demand subject populations, this paper discusses the dynamic evolution process of strategy between individuals within construction enterprise populations and between construction enterprise populations and consumer populations. Firstly, based on Moran process, the stochastic evolutionary game model of construction enterprises adopting independent innovation strategy was constructed to obtain the conditions for the dominance of independent innovation strategy. Next, the bimatrix game model of construction enterprise populations and consumer populations was constructed to obtain the equilibrium frequency of the joint strategy. Then, the influence laws of the change of parameters on game were discussed through numerical simulations. The results show that (1) reducing the cost of independent R&D cost, reducing the spillover effect coefficient, increasing the loss of technology introduction, and increasing R&D subsidies for independent innovation construction enterprises are all conducive to IIS becoming an evolutionary stable strategy. (2) The marginal effect of IIS increases with the decrease in the spillover effect coefficient, the increase in the loss of technology introduction of construction enterprises, and the increase R&D subsidies. (3) The smaller the mutation rate is, the greater the cross-price sensitivity coefficient is, the greater the green sensitivity coefficient is, the greater the probability of government active encouragement is, and the more dominant (production of green buildings, purchase of green buildings) is. Finally, relevant measures and suggestions are proposed.

Optimal decisions of modularity, prices and return policy in a dual-channel supply chain under mass customization

Online customization is very popular among consumers in current e-commerce because of its flexible customization time and diverse product attributes. This paper establishes a dual-channel supply chain composed of one manufacturer and one retailer under mass customization. The manufacturer sells standard products offline via the retailer when providing modular customized products online. Two online distribution strategies of the manufacturer are considered: The manufacturer can choose direct or agency sales through the retailer’s online channel. Additionally, the return policy of modular customized products available online is explored. A Stackelberg game model is proposed under each return scenario (with and without online consumer returns) to derive the optimal solutions for different channel strategies. Then, the influence of different parameters on the optimal modularity level and product prices is investigated under each model. Through sensitivity analysis, we found that the cross-price sensitivity coefficient of dual channels has a considerably positive impact on optimal decisions. Furthermore, the manufacturer’s channel strategy and return policy decisions are examined. The result indicates that direct sales should be chosen if manufacturers’ online channel operating costs are lower than a certain threshold that increases with the revenue allocation ratio under agency sales. When the market demand of the product that is allowed to be returned is much more sensitive to the refund than its return quantity, a full refund policy should be offered for online customized products. These conclusions also apply to the return scenario where full refunds are provided for both standard and customized products.

Category management under non-symmetric demands

Category management is known as a strategic approach that can enhance the collaboration between retailers and manufacturers in a supply chain. In this study, we examine two category management scenarios, Retailer Category Management (RCM) and Category Captainship (CC), for a two-stage supply chain in which two manufacturers sell their substitutable products through a common retailer. Based on non-symmetric demand functions, we develop two mathematical models in which the retailer adopts RCM and CC. By comparing these two models’ equilibrium outcomes, the following insights are found. First, the optimal policy for shelf space allocation and pricing decisions are obtained. Second, we indicate three situations under which competitive exclusion does not exist. This supports decisions on whether to switch from RCM to CC. Third, our analysis shows the evidence to support the retailer on choosing the category captain regarding either the retailer's join profit gain or the competitive exclusion. Last, we highlight the various conditions under which the retailer has either low or high flexibility in choosing products for the category, when the competitive exclusion is concerned. Our model is the first to illustrate the interaction impact of non-symmetric market potential, non-symmetric own-price elasticity and cross-price sensitivity on category management.

Effect of Optimal Subsidy Rate and Strategic Behaviour of Supply Chain Members under Competition on Green Product Retailing

This paper investigates the impact of the subsidy and horizontal strategic cooperation on a green supply chain where two competing manufacturers distribute substitutable green products through exclusive retailers. Models are formulated in three-stage game structures in five different scenarios, where the government organization determines optimal subsidy by pursuing social welfare maximization. Both manufacturers invest in improving green quality levels of products. The study aims to explore the advantage of vertical integration and strategic collusion from the perspective of green supply chain practice in the presence of subsidy. The key contributions from the present study indicate that under competition, members of both supply chains are able to receive higher profits through horizontal collusion, but green quality levels of the product remain suboptimal. If upstream manufacturers cooperate, government subsidy does not necessarily improve product quality level, and the amount of government expenditure increased substantially. By comparing outcomes where members are vertically integrated with scenarios where members make strategic collusion, we found that the former might outperform by later. Cross-price sensitivity appears as a significant parameter affecting supply chain members’ performance and the amount of government expenditure. Cooperation between members at the horizontal level is a more robust strategic measure than vertical integration if consumers are highly price-sensitive.

A game theoretic approach for integrated pricing, lot-sizing and advertising decisions in a dual-channel supply chain

This paper discusses the coordination of pricing, lot-sizing and advertising policies in a dual-channel supply chain including one manufacturer and one retailer. The manufacturer produces one type of product and sells it to the retailer at wholesale price and also directly to consumers through direct channel. Consumers buy the product at retail price from the retailer and with direct sale price from the manufacturer. Demand depends on price and advertising efforts. Relationship between the manufacturer and the retailer has been modelled by two non-cooperative games of Nash and Stackelberg-retailer and one cooperative game. Finally, the change effect of the important parameters on the profit functions and the decision variables has been investigated. The results show that with increasing the cross-price sensitivity, the manufacturer's equilibrium profit for the two non-cooperative games increases. However, the increase in this parameter has no effect on the retailer's equilibrium profit.

Analysis of the Impact of Different Forecasting Techniques on the Inventory Bullwhip Effect in Two Parallel Supply Chains with a Competition Effect

This paper studies the impact of different forecasting techniques on the inventory bullwhip effect in two parallel supply chains with the competition effect, which is in contrast to the situation of a single product in a serial supply chain. In particular, this paper constructs two parallel supply chains, each of which includes one manufacturer and one retailer. Moreover, the market demand is impacted by the self-price sensitivity coefficient, the cross-price sensitivity coefficient, the market share, and the demand shock. We then assumed that the retailer can forecast market demand by using different forecasting techniques (i.e., the moving average technique (MA), the exponential smoothing technique (ES), and the minimum mean square error technique (MMSE)). We constructed the quantity model of the bullwhip effect and the inventory bullwhip effect. Finally, we analyzed the impact of different forecasting techniques and market share on the inventory bullwhip effect. We analyzed the conditions under which the retailers should choose different types of forecasting techniques on the basis of the inventory bullwhip effect. The results show that the MMSE forecasting technique can reduce the lead-time demand forecast error to the largest extent, and the inventory bullwhip effect can obtain the lowest level using the MMSE method: retailer-1 can reduce the inventory bullwhip effect by using the MA technique, when the self-price sensitivity coefficient, the price autoregressive coefficient, and the probabilities associated with customers choosing retailer-1’s product are very low.

Independent sales or bundling? Decisions under different market-dominant powers

Enterprises are aware that bundling strategies can improve profitability in the highly competitive marketplace. This study evaluates an online to offline (O2O) supply chain system made up of a supplier and an e-retailer who can sell two products independently or bundled through online and offline channels, and discuss the influence of pricing strategy and channel choice on profit under different market-dominant powers. Based on a game theory model, we derive an optimal wholesale price for the supplier, an optimal sale price for the e-retailer, and their respective profit. We demonstrate that a Stackelberg leader is more profitable, irrespective of whether independent sales or bundling are chosen. Regardless of who the leader is, the whole supply chain receive equal profit. For a market leader, independent sales or bundling decisions should be made according to market size. Sensitivity analysis show that as the self-price sensitivity coefficient increases, the profit monotonically decreases for both independent sales and bundling; this occur for both the market dominated by the supplier and that dominated by the e-retailer. For independent sales, as the cross-price sensitivity coefficient increases, the profit monotonically increases; for bundled sales, the profit of the game players is not affected.

Pricing decisions for substitutable products with green manufacturing in a competitive supply chain

Abstract In this paper, we examine the pricing strategies in a two-stage supply chain with two competitive manufacturers and one retailer. We address six game models: the centralized model (Model I), the MS-Bertrand model (Model II), the MS-Stackelberg model (Model III), the RS-Bertrand model (Model IV), the RS-Stackelberg model (Model V) and the cost-sharing contract model (Model VI) to explore the optimal pricing strategies of substitutable products. We address the optimal green manufacturing level, retail prices, wholesale prices and the profits of supply chain members as well as the whole supply chain under different models. Numerical examples are provided to demonstrate the efficiency and effectiveness of the proposed models. First the impact of green investment on the green manufacturing level and supply chain performance is examined. Then the impact of price elasticity, cross-price sensitivity and green manufacturing coefficient on the green manufacturing level is analyzed. We find that the centralized model is the best, and the cost-sharing contract model will be better than the four decentralized models when the cost-sharing proposition is in a certain interval. Additionally, in decentralized scenarios, the Stackelberg model has an advantage for manufacturers while the Bertrand model is superior for the retailer. Our results also indicate that green manufacturing will benefit the manufacturer involved in green investment.

Decision analysis of retailer-dominated dual-channel supply chain considering cost misreporting

This study discusses a dual-channel supply chain, wherein the retailer is the leader of the Stackelberg game consisting of two manufacturers and one retailer. In this model, one of the manufacturers simultaneously sells a product through direct and retail channels, while the seller merely uses the retail channel. First, this study explains the optimal pricing problem of the supply chain, and analyzes the relationship among the optimal lied factors of the manufacturer, the cross-price sensitivity of the customer, and cost when maximizing manufacturer profit. Second, this study compares the impact on supply chain performance between the strategies where a manufacturer lies about the cost information and complete information and the other manufacturer only lies about cost information. Finally, results show that manufacturers raise their cost information when they have superior information. However, their misreporting behavior causes adversity between the retailer and the entire supply chain. And, the influence is related to cross-price sensitivity of a customer. Furthermore, although the misreporting behavior of manufactures benefits some participants of a supply chain, it is unfavorable for the whole supply chain.

Optimal Financing Decisions of Two Cash-Constrained Supply Chains with Complementary Products

In recent years; financing difficulties have been obsessed small and medium enterprises (SMEs); especially emerging SMEs. Inter-members’ joint financing within a supply chain is one of solutions for SMEs. How about members’ joint financing of inter-supply chains? In order to answer the question, we firstly employ the Stackelberg game to propose three kinds of financing decision models of two cash-constrained supply chains with complementary products. Secondly, we analyze qualitatively these models and find the joint financing decision of the two supply chains is the most optimal one. Lastly, we conduct some numerical simulations not only to illustrate above results but also to find that the larger are cross-price sensitivity coefficients; the higher is the motivation for participants to make joint financing decisions; and the more are profits for them to gain.

Pricing and shelf space decisions with non-symmetric market demand

We discuss a pricing and shelf space size decision problem in a single retailer-two manufacturer supply chain where products from two different manufacturers have non-symmetric market demand functions. The retailer decides on the size of the available shelf space and the retail price for each product, while the manufacturers determine the wholesale prices for their own products. The linear demand function by Shubik and Levitan (1980) is extended to incorporate the non-symmetric market potential, production costs, and cross-price sensitivity. Mathematical models are developed to determine the optimal shelf space and retail and wholesale price, and to analyze how differences in the market potential, production cost and cross-price sensitivity of the products affect the optimal solutions. The study results show that a firm can adopt a mixed strategy of using the influence of the market potential and cross-price sensitivity simultaneously to achieve a pre-specified profit. We also show that a manufacturer can use a product differentiation strategy to offset the impact caused by an increase in production cost. Moreover, shelf space management should act in accordance with any change in the production cost of the products in the same category. We also find that the retailer can control the influence of a product׳s market potential and production cost on the total demand and retail prices via the shelf space cost management. Our model is the first to illustrate the interaction effect of non-symmetric market potential, production costs, and cross-price sensitivity.

Supply chain coordination under retail competition using stock dependent price-setting newsvendor framework

Short life-cycle products which are characterized by uncertain demand, short selling season and long lead times have been posing many challenges to supply chain members. Demand of these products depends on several factors such as price, quality, service etc. Apart from these, many business practices have revealed that presence of a larger quantity of goods displayed at retail level also attract customers considerably. This paper captures the stock dependency phenomenon and investigates the role of quantity discounts and returns policies in the coordination of a supply chain. Here, the manufacturer in addition to returns policy provides quantity discounts to two competing retailers who face price-sensitive, stock dependent and uncertain demand. Using the newsvendor framework, a combined contract model is developed and sensitivity analysis is performed to analyze the impact of various parameters on supply chain coordination. The result shows that proposed contract mechanism fails to coordinate when the value of price sensitivity factor approaches the value of cross price sensitivity factor. Further, price-sensitivity and cross-price sensitivity have little effect on coordination benefit at lower values of stock dependency whereas there is a significant impact at higher values of stock dependency.

Direct-to-Consumer Advertising of Prescription Drugs: A Strategic Analysis

Consumers cannot purchase a prescription drug without a prescription from a physician, yet many prescription drugs are promoted to consumers with the help of direct-to-consumer (DTC) advertising. In this paper, we propose and test a competitive model of DTC advertising. We find that the brand specificity of DTC advertising can have an inverted U-shaped relationship with detailing, DTC advertising, and profits. Furthermore, an increase in the cross-price sensitivity between competing prescription drugs is not always detrimental to firm profits. A laboratory test lends qualitative support to some of our model predictions. We also discuss potential implications of DTC advertising for generic drugs and over-the-counter drugs.

An analysis of the determinants of broadband access

This paper extends the analysis of the relative impacts of socioeconomic factors on households’ decision to subscribe to dialup Internet access [Chaudhuri, A., Flamm, K., & Horrigan, J. (2005). An analysis of the determinants of Internet access, presented at the Telecommunications Policy Research Conference, Washington, DC, October 1–3] to the decision to subscribe to broadband. A simple cumulative utility (ordered logit) model is rejected in favor of a partial proportional odds model, and the authors found that the decision to purchase any access at all, and the decision to upgrade to broadband, may be affected differently by various socioeconomic factors. The own-price elasticity of broadband demand is statistically significant and has a substantial coefficient value. The cross-price sensitivity of broadband demand with respect to dialup price is also statistically significant, and supports the notion of the two services being substitutes.

The Introduction and Performance of Store Brands

We present an analytical framework for understanding what makes a product category more conducive for store brand introduction. We also investigate market characteristics that help explain differences in store brand market share across product categories. Our findings suggest that the introduction of a store brand is likely to increase retailer's profits in a product category if the cross-price sensitivity among national brands is low and the cross-price sensitivity between the national brands and the store brand is high. Our model predicts that the store brand share would also be greater under these conditions. In addition, we find that the introduction of a store brand is more likely to lead to an increase in category profits if the category consists of a large number of national brands—even though the store brand market share is expected to be lower when there are a large number of national brands. We compare the key predictions of our model with data on 426 grocery product categories. The data are consistent with the predictions of the model.