Evolutionary Location and Pricing Strategies in Competitive Hierarchical Distribution Systems: A Spatial Agent-Based Model

Abstract

Facing horizontal channel competition in a hierarchical distribution system, independent intermediaries such as wholesalers and retailers are keen to find the optimal location and pricing strategies that enable them to adapt to the increasingly competitive business environment. To help market intermediaries to address their challenges, we propose in this paper a spatial agent-based model (SAM), grounded in complex adaptive systems, which comprises four types of agents, namely the world, the manufacturer, firms, and consumers. We derive the firms' optimal behaviors in response to competition by evaluating the evolutionary location and pricing strategies using a genetic algorithm. We observe that a pyramid structure and the bullwhip effect in demand emerge from the evolutionary behavior of the SAM. We also find that buyers' searching ability enhanced by information technology has a significant effect on the degree of competition in a hierarchical distribution system. In addition, we find that firms that distribute elastic goods are likely to lower their prices to attract more buyers and move closer to their suppliers to save transport costs. In the case that the product demand is inelastic, intermediaries will move as close to their buyers as possible because they can maximize their profits in the SAM.Index Terms-Agent-based modeling, competitive location problem, complex adaptive system, hierarchical distribution system, location and pricing.

Quick Response Healthcare Apparel Supply Chains: Value of RFID and Coordination

“…Prior studies reported in [38] and [39] are excellent references for this future research direction. Last but not least, competition issues [40] under QRS in the SC with multiple hospitals (i.e., multiple retail-buyers [43]) may also be examined in the future. …”

Inventory Control System for a Healthcare Apparel Service Centre with Stockout Risk: A Case Analysis

“…In the literature, different kinds of stochastic inventory control systems are proposed and explored (see [ 3 – 9 ] and [ 10 , 11 ]). The ( Q,r )-based optimal inventory control policy is one of them and has been popularly examined.…”

A Task-Oriented Heuristic for Repairing Infeasible Solutions to Overlapping Coalition Structure Generation

“…That is, the agent can often be attributed to different categories or goals in which members are overlapping and interrelated [10], [11]. For example, in virtual organizations [12], [13] and wireless networks [14], [15], an agent with sufficient resources is able to apply for joining several completely different cooperative coalitions to earn more profits or achieve more objectives. The reason for this is that overlapping coalitions make it possible for agents to form a coalition for each task, without preventing other tasks from being satisfied [10].…”