Responsive pricing strategy under random yield and stochastic demand

To deal with the problem caused by supply uncertainty, a two-stage supply chain model under random yield and stochastic demand environment was constructed. Through a three-stage Stackelberg game analysis, retailer's optimal joint order, product price and supplier's wholesale price decision were discussed with responsive pricing strategy. The difference between responsive pricing strategy and market clearance pricing strategy as well as the impact of random yield and stochastic demand on the value of responsive pricing strategy were analyzed. The results showed that the retailer's profit was increased by responsive pricing, but the supplier's profit might be decreased. Responsive pricing had larger value to supplier and retailer when the expected yield rate was high and expected potential market demand was low, whereas the uncertainty of yield rate and potential market demand had non-monotonic impact on the value of responsive pricing strategy. ©, 2014, Editorial Department of CIMS. All right reserved.