Price promotion with reference price effects in supply chain |
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| Institution: | 1. GERAD, HEC Montréal, Canada;2. Chair in Game Theory and Management, GERAD, HEC Montréal, Canada;3. 3000, Côte-Sainte-Catherine, Montréal Québec, H3T 2A7, Canada;1. Department of Business Administration, Aletheia University, Tamsui, New Taipei City 25103, Taiwan;2. Graduate School of Business and Administration, Shu-Te University, Yen-Chao, Kaohsiung 824, Taiwan;1. Ehrenberg-Bass Institute for Marketing Science, Business School, University of South Australia, Adelaide, Australia;2. Communicado Pty LTD, Melbourne, Australia;1. School of Information Management, Central China Normal University, Wuhan, Hubei Province, China, 430079;2. College of Economics and Management, Huazhong Agricultural University, Wuhan, Hubei Province, China, 430070;1. School of Computational Science & Engineering, McMaster University, Canada;2. DeGroote School of Business, McMaster University, Canada |
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| Abstract: | We consider the price promotion in a supply chain comprising one manufacturer and one retailer, who take into account the reference price effects of consumers. The problem is analyzed as a manufacturer-lead Stackelberg game. The results indicate that reference price effects could mitigate “double marginalization” effects, and improve the channel efficiency. We also show that the optimal price promotion benefits the manufacturer, retailer and consumers in consumer promotion model. Furthermore, we provide the conditions under which the retailer has an interest in offering price promotion to consumers. Finally, we employ numerical analysis to demonstrate more managerial insights. |
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| Keywords: | Supply chain management Double marginalization Price promotion Reference price effects |
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