Competition and cooperation models for dynamic pricing of perishable products in a two-echelon supply chain

Abstract

This paper considers a two-level supply chain involving a supplier and a retailer. The retailer sells perishable products to consumers over a finite time horizon, and the demand is driven by a price-and-utility function. First, we study the noncooperative problem, which is formulated by a Stackelberg model. It is shown that the optimal pricing strategy of the retailer is to reduce a constant amount on the price at the beginning of each stage. Second, we examine the cooperative problem, in which the supplier and the retailer jointly price the product. Maximum selling cycle lengths of the two situations are obtained by analyzing the reasonability of the sales price. We demonstrate that the selling cycle length is extended by cooperation. Moreover, we show that they lower the sales price in the cooperative case so as to maximize the total profit. Meanwhile, an allocation method is provided based on the proportion.