Price and Warranty Period Decision in Different Channel Structures for Durable Product

Abstract

A decision problem is investigated in a decentralized two-echelon supply chain with one manufacturer and one retailer during a fixed sales time. There are three possible power balance scenarios: Manufacturer-Stackelberg, retailer-Stackelberg, vertical Nash classified by the different influence on the market between the manufacturer and the retailer. Aiming at profit maximization,from the perspectives of the consumer, the manufacturer and the retailer, respectively, the results of the three scenarios are analyzed, in which the retailer price P, warranty period W and the whole price CP are decision variables. Moreover, the sales over time can be characterized by a stochastic Bass model in the form of a non-homogeneous Poisson process (NHPP-Bass model) and the production system is a make-to-order type of system. Finally, A numerical example is provided to illustrate the effects of some key parameters, including the product reliability, price elasticity, and warranty period elasticity, on the optimal settings of the retail price and warranty period.