Price Wall or War: The Pricing Strategies for Retailers
In this paper, we apply the game theory to study some strategic actions for retailers to fight a price war. We start by modeling a noncooperative pure pricing game among multiple competing retailers who sell a certain branded product under price-dependent stochastic demands. A unique Nash equilibriu...
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| Veröffentlicht in: | IEEE transactions on systems, man and cybernetics. Part A, Systems and humans man and cybernetics. Part A, Systems and humans, 2009-03, Vol.39 (2), p.331-343 |
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| container_end_page | 343 |
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| container_title | IEEE transactions on systems, man and cybernetics. Part A, Systems and humans |
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| creator | Chiu, Chun-Hung Choi, Tsan-Ming Li, Duan |
| description | In this paper, we apply the game theory to study some strategic actions for retailers to fight a price war. We start by modeling a noncooperative pure pricing game among multiple competing retailers who sell a certain branded product under price-dependent stochastic demands. A unique Nash equilibrium is proven to exist under some mild conditions. We demonstrate mathematically the incentives for retailers to start a price war. Based on a strategic framework via the game theory, we illustrate the use of service level to build price walls which can prevent a huge drop in price, as well as profit. Three kinds of price walls are proposed, and the respective strengths and weaknesses have been studied. Analytical conditions, under which a price wall can effectively prevent big drops in both market share and profit, are developed. Aside from the proposed price walls, two other pricing strategies, which can lead to an all-win situation, are examined. |
| doi_str_mv | 10.1109/TSMCA.2008.2010753 |
| format | Article |
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| source | IEEE Electronic Library (IEL) |
| subjects | Companies Construction Cybernetics Game theory Games Mathematical analysis Nash equilibrium price war Pricing pricing game Pricing policies Profitability Research and development management retailing service level Stochastic processes Strategy Studies Systems engineering and theory Textiles Walls |
| title | Price Wall or War: The Pricing Strategies for Retailers |
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