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Pricing decision with conspicuous customers: quick responses versus value-added services

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Listed:
  • Weihua Liu
  • Wanying Wei
  • Meili Wang
  • Ou Tang
  • Li Zhou

Abstract

In order to eliminate the negative effects of customer strategic behaviour, retailers often adopt quick response or value-added services. While in a luxury market with conspicuous customers, retailers’ pricing decisions of these two strategies become more complicated. This paper studies a supply chain with a retailer serving a mixture of conspicuous and ordinary strategic customers. We develop three models so that the retailer provides (i) neither quick response nor value-added services; (ii) only quick response; (iii) only value-added services. Subsequently, we analyse the impacts of conspicuous customers on quick response and value-added services by pricing and strategy comparisons. The model further extends to the situation including both strategies. The results show that, firstly, when the proportion is less than a threshold, the retailer should adopt a low price strategy, and vice versa. Besides, the quick response could induce the retailer to adopt high price while value-added services inhibit it. Secondly, the customer conspicuous behaviour can motivate retailers to provide quick response and inhibit their value-added services. Finally, by observing the retailer's decisions when they can adopt two strategies simultaneously, we find that the existence of quick response can amplify the benefits of value-added services.

Suggested Citation

  • Weihua Liu & Wanying Wei & Meili Wang & Ou Tang & Li Zhou, 2021. "Pricing decision with conspicuous customers: quick responses versus value-added services," International Journal of Production Research, Taylor & Francis Journals, vol. 59(6), pages 1691-1713, March.
    • Handle: RePEc:taf:tprsxx:v:59:y:2021:i:6:p:1691-1713
    DOI: 10.1080/00207543.2020.1724341
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    Cited by:

    1. Tianjian Yang & Chunmei Li & Xiongping Yue & Beibei Zhang, 2022. "Decisions for Blockchain Adoption and Information Sharing in a Low Carbon Supply Chain," Mathematics, MDPI, vol. 10(13), pages 1-23, June.

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