Joint pricing and advertising strategy with reference price effect

Lu, Lihao; Gou, Qinglong; Tang, Wansheng; Zhang, Jianxiong

doi:10.1080/00207543.2016.1165878

Cited by 74 publications

(41 citation statements)

References 23 publications

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“…Therefore, in our model, specification ss = + ss / will hold for the reason that not only the retail price has the effect on the reference price in the minds of consumers, but also the goodwill of the product can affect the reference price in the long run. Our setting coincides with the previous studies such as Lu et al [26], Zhang et al [27].…”

Section: Model Frameworksupporting

confidence: 92%

Myopic versus Far-Sighted Behaviors in Dynamic Supply Chain Coordination through Advertising with Reference Price Effect

Chen

2017

Discrete Dynamics in Nature and Society

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To better understand the different effects of the myopic and far-sighted behaviors on the advertising coordination in dynamic supply chain, this paper takes the reference price effect into consideration and formulates four differential game models for the two-level supply chain composed of a manufacturer and a retailer in the situation of Stackelberg game. In our models, the market demand is assumed to be affected by the goodwill, reference price, and the advertising investment, in which the advertising investment can promote the construction of goodwill and such goodwill can further enhance the reference price. The results show that the participating members in the supply chain should invest more in advertisement to improve the goodwill and the relative reference price reflected in the minds of consumers. A far-sighted manufacturer will invest more in the advertisement and charge a higher wholesale price regardless of the behavior choice of the retailer. However, such kind of ignorance leads to different results on the retail pricing strategies of the retailer. The numerical analyses are given in the end to verify the effectiveness of the conclusions which provide the theoretical support to the dynamic supply chain coordination in practice. Hindawi

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Section: Model Frameworksupporting

confidence: 92%

Myopic versus Far-Sighted Behaviors in Dynamic Supply Chain Coordination through Advertising with Reference Price Effect

Chen

2017

Discrete Dynamics in Nature and Society

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“…Hu et al [22] considered a gain-seeking reference price effect model and identified conditions on parameters such that a highlow pricing strategy is optimal. Besides these studies, some valuable insights are also reached by integrating pricing with other decision variables, such as advertising strategy [8,23], replenishment policies [24,25], and preservation technology investment [26]. Our study is significantly different from aforementioned papers in that we consider firms that only master partial information.…”

Section: Related Literaturementioning

confidence: 82%

“…In addition to purchase frequency, brand loyalty, and involvement levels, Chen [7] demonstrated that self-construal influences the impact of reference cues. Besides the above factors, advertising is often used to influence reference price as an operational management tool [8,9].…”

Section: Introductionmentioning

confidence: 99%

Implications for Firms with Limited Information to Take Advantage of Reference Price Effect in Competitive Settings

Guo

2017

Complexity

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This paper studies internal reference price effects when competitive firms face reference price effects and make decisions based on partial information, where their decision-making mechanism is modeled by a dynamic adjustment process. It is shown that the evolution of this dynamic adjustment goes to stabilization if both adjustment speeds are small and the complexity of this evolution increases in adjustment speeds. It is proved that the necessary condition for flip bifurcation or Neimark-Sacker bifurcation will occur with the increase of adjustment speed in two special cases. What is more, numerical simulations show that these bifurcations do occur. Then, the impacts of parameters on stability and profits are investigated and some management insights for firms with limited information to take advantage of reference price effects are provided.

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“…This is also common in the mobile phone market in view of two observations. One is that the telecom service price is relatively stable over a long sales period (Lu et al., ); the other is that consumers focus far more attention on the high and fluctuant retail price of handset due to the rapid evolution of technology and the fashion features of the mobile phone industry (Chen and Wang, ). Without loss of generality, we assume that

p_{b} > c_{m}

p_{u} > c_{m}

p_{o} > c_{o}

, and

p_{o} > c_{o} + c_{m}

, and these assumptions are also consistent with the overwhelming majority of industry practice.…”

Section: The Dual Sales Channels Of the Mobile Phone Sectormentioning

confidence: 99%

Coordination in competitive dual sales channels of the mobile phone industry

Wang

Fan

Zhao

2017

Int Trans Operational Res

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This paper examines the supply chain coordination and contracting issue for competitive dual sales channels of the mobile phone industry in which a telecom service operator (operator) cooperates and competes with a handset manufacturer (manufacturer) to deliver the complementary telecom service and handset to end consumers. After deriving the equilibrium strategy based on the game theoretical paradigm, we present the sensitivity and comparative analysis as well as the coordination analysis. Among others, our result shows that the widely used subsidy‐only contract fails to coordinate this dual sales system. To solve the coordination failure, we propose a two‐way revenue sharing contract that can be well utilized to realize the first best outcome, and even guarantee the win–win situation, in particular under the situation when the telecom service price is sufficiently high.

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Joint pricing and advertising strategy with reference price effect

Cited by 74 publications

References 23 publications

Myopic versus Far-Sighted Behaviors in Dynamic Supply Chain Coordination through Advertising with Reference Price Effect

Myopic versus Far-Sighted Behaviors in Dynamic Supply Chain Coordination through Advertising with Reference Price Effect

Implications for Firms with Limited Information to Take Advantage of Reference Price Effect in Competitive Settings

Coordination in competitive dual sales channels of the mobile phone industry

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