490 / 2024-04-25 16:41:03

The impact of personalized pricing in a supply chain with a common retailer

personalized pricing,supplier selection,Pricing Strategy

Leveraging the pricing strategy to adjust product competition is a critical issue in operational management. In this paper, we examine a supply chain where a retailer sells either a single product or two quality-differentiated products supplied by two suppliers. The supply chain encompasses competition that is both vertical, occurring between the retailer and suppliers, and horizontal, taking place between the two suppliers. We characterize how a common retailer should implement personalized pricing by balancing the marginal profit and sales volume obtained from selling products when there is product competition in the market. We identify the conditions under which the retailer should choose one or both of the two suppliers and show that in certain circumstances, the retailer will prefer to work with both suppliers, even though either product may have no sales. We find that if there is no product competition in the market, the retailer is always willing to implement personalized pricing. Product competition can lead the retailer to implement a uniform price, as personalized pricing can exacerbate the competition between products, thus harming the retailer's profits.