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Manufacturer's pricing strategies in a single-period framework under price-dependent stochastic demand with asymmetric risk-preference information

Author

Listed:
  • F J Arcelus

    (Universidad Pública de Navarra
    University of New Brunswick)

  • S Kumar

    (JDA Software (India) Pvt. Ltd)

  • G Srinivasan

    (University of New Brunswick)

Abstract

This paper considers a single-period problem designed to analyse the pricing strategy of a manufacturer who does not possess full information about the retailer's risk-preferences. The retailer, who faces a price-dependent stochastic demand, is a maximizer of the risk-adjusted expected profit, rather than of the expected profit. The paper first evaluates the implication of the various risk-preferences of the retailer on the manufacturer's policy under a full-information scenario. Then, it considers a partial information scenario and computes the expected value of perfect information. Finally, it assesses the impact on the manufacturer's profit of sharing the retailer's risk through the introduction of a buyback policy. Linear or iso-elastic demand functions and additive or multiplicative demand error structures capture the demand distributions. Analytical results as well as numerical examples illustrate the main features of the model.

Suggested Citation

  • F J Arcelus & S Kumar & G Srinivasan, 2007. "Manufacturer's pricing strategies in a single-period framework under price-dependent stochastic demand with asymmetric risk-preference information," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 58(11), pages 1449-1458, November.
    • Handle: RePEc:pal:jorsoc:v:58:y:2007:i:11:d:10.1057_palgrave.jors.2602400
    DOI: 10.1057/palgrave.jors.2602400
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    References listed on IDEAS

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    Cited by:

    1. Keyuan Cai & Zhen He & Yaqi Lou & Shuguang He, 2020. "Risk-aversion information in a supply chain with price and warranty competition," Annals of Operations Research, Springer, vol. 287(1), pages 61-107, April.
    2. Zhen Zhang & Songtao Zhang & Mingshi Yue, 2021. "Joint pricing and replenishment policies for risk‐averse retailers under duopolistic competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1849-1864, October.
    3. Salvatore Cannella & Roberto Dominguez & Jose M. Framinan & Manfredi Bruccoleri, 2018. "Demand Sharing Inaccuracies in Supply Chains: A Simulation Study," Complexity, Hindawi, vol. 2018, pages 1-13, July.
    4. Chen, Ying-Ju & Gui, Zhengqing & von Thadden, Ernst-Ludwig & Zhao, Xiaojian, 2024. "Supply Chain Frictions," CEPR Discussion Papers 19013, C.E.P.R. Discussion Papers.
    5. Cui-Hua Zhang & Peng Xing & Jin Li, 2018. "Optimal Strategy of Social Responsibility and Quality Effort in Service Supply Chain with Quality Preference," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(03), pages 1-43, June.

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