Effect of fairness and overconfidence on pricing strategy of substitute bundles in a two-echelon supply chain

Ganguly, Sanchari; Kuiti, Mithu Rani; Das, Pritha; Maiti, Manoranjan

doi:10.1051/ro/2023009

Cited by 5 publications

(3 citation statements)

References 49 publications

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“…In addition, the increase in advertising investment may lead to changes in retail prices. Therefore, researching retail price as a decision variable while considering NBFC in cooperative advertising may be meaningful [11,46]. Furthermore, we focus on the impact of NBFC on the cooperative advertising program.…”

Section: Discussionmentioning

confidence: 99%

“…Furthermore, we focus on the impact of NBFC on the cooperative advertising program. Introducing other behaviors, such as reference effect and overconfidence, would be interesting [11,22]. Moreover, as supply chain viability is a relatively new research area, combining it with fairness preferences for research is also a worthwhile direction to explore [25,42,43].…”

Section: Discussionmentioning

confidence: 99%

“…The second stream focuses on NBFC in the supply chain. Various academic studies investigated fairness concerns about profit allocation in the supply chain [5,9,11,19,24,39,40,[47][48][49]57]. Different from taking the profit distributed by the partner as the reference point, NBFC apply the Nash bargaining solution as a standpoint, which leads to a new perspective on fairness concerns research and is closer to reality [6,7,10,13,37,53,55].…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Cooperative advertising and coordination in a supply chain: the role of Nash bargaining fairness concerns

Du,

Jiang,

Tao

et al. 2024

RAIRO-Oper. Res.

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This study constructs a game-theoretic model of cooperative advertising in a supply chain with Nash bargaining solutions as the fairness reference point. We use a square root response function to describe the saturation effect of advertising. We find that the retailer's Nash bargaining fairness concerns (NBFC) improve the local advertising investment even more than the level of the centralized case. The effect of NBFC on the retailer's profit is inverted U-shaped, rising first and then falling, and vice versa for the manufacturer. As the fairness-concerned coefficient increases from small to large, the efficiency of the supply chain changes from improvement to decline. Moreover, we find that a two-way subsidy mechanism in cooperative advertising still works on coordination although the retailer possesses NBFC. The study offers practical management insights into the operational strategies of supply chain members.

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Section: Discussionmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Cooperative advertising and coordination in a supply chain: the role of Nash bargaining fairness concerns

Du,

Jiang,

Tao

et al. 2024

RAIRO-Oper. Res.

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Pricing strategy of traceable agricultural supply chain decisions considering retailer's overconfidence with government subsidy

Lan,

Liu

2025

Alexandria Engineering Journal

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The effect of overconfidence in a robust competing game

Chang

2023

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PurposeThis study aims to investigate the effects and implications of overconfidence in a competitive game involving multiple newsvendors. This study explores how overconfidence influences system coordination, optimal stocking strategies and competition among newsvendors in the context of the well-known newsvendor stocking problem.Design/methodology/approachThe study applies robust optimization theory and the absolute regret minimization criterion to analyze the competitive game of overconfident newsvendors. This study considers the asymmetric information held by newsvendors regarding market demand and obtains a closed-form solution for the competing game. The effects of overconfidence on system coordination and optimal stocking strategies are examined.FindingsThe results of the study indicate that overconfidence can act as a positive force in reducing the effects of overstocking caused by competition and asymmetric information among newsvendors. The analysis reveals that there exists an optimal level of overconfidence that coordinates the ordering system of multiple overconfident newsvendors, leading to first-best outcomes under certain conditions. Additionally, numerical examples confirm the obtained results. Furthermore, considering newsvendors' expected profit, the study finds that a higher degree of overconfidence does not necessarily result in lower actual expected profit.Research limitations/implicationsDespite the significant contributions of this study to theoretical and managerial insights, this study does have certain limitations. First, in the establishment of the belief demand function, the substitution ratio, which quantifies the transfer, is assumed to be an exogenous variable. However, in reality, this is often influenced by factors such as the price of goods and the distance between stores. Therefore, one direction worth studying in the future is to explore the uncertainty associated with the demand substitution ratio and integrate that as an endogenous variable into the optimization model. Second, this study does not address the type of product and solely focuses on quantitatively analyzing the effect of salvage value on the optimal stocking strategy. Future studies can explore the effect of degree of perishability and selling period of the product on the stocking. Third, the focus of uncertainty in this study revolves around market demand, and the implications of this uncertainty are significant. A recent study (Rahbari et al., 2023) addressed an innovative robust optimization problem related to canned foods during pandemic crises. The recent study's findings highlighted the effectiveness of expanding canned food exports to neighboring countries with economic justification as the best strategy for companies amidst the disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic. Incorporating the issue of disruptions into the authors' research would be interesting and challenging.Practical implicationsFrom a managerial perspective, the authors' study provides a research paradigm for game-theoretic inventory problems in scenarios where the market demand distribution is unknown. While most inventory problems are analyzed and solved based on expectation-based optimization criteria, which rely on an accurate distribution of market demand, obtaining this information in practice can often be challenging or expensive for decision-makers. Consequently, a discrepancy arises between real-world observations and theoretical identifications. This study aimed to complement previous research and address the inconsistency between observations and theoretical identification.Social implicationsThe authors' research contributes to the existing understanding of overconfidence and assists individuals in making appropriate stocking strategies based on the individuals' level of overconfidence. Diverging significantly from the traditional view of overconfidence as a negative bias, the authors' results show the view's potential positive impact within a competitive environment, resulting in greater actual expected profits for newsvendors.Originality/valueThis study contributes to the existing literature by examining the effects of overconfidence in a competitive game of newsvendors. This study extends the analysis of the well-known newsvendor stocking problem by incorporating overconfidence and considering the implications for system coordination and competition. The application of robust optimization theory and the absolute regret minimization criterion provides a novel approach to studying overconfidence in this context.

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Effect of fairness and overconfidence on pricing strategy of substitute bundles in a two-echelon supply chain

Cited by 5 publications

References 49 publications

Cooperative advertising and coordination in a supply chain: the role of Nash bargaining fairness concerns

Cooperative advertising and coordination in a supply chain: the role of Nash bargaining fairness concerns

Pricing strategy of traceable agricultural supply chain decisions considering retailer's overconfidence with government subsidy

The effect of overconfidence in a robust competing game

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