Effectiveness of dynamic pricing strategy in presence of supply chain disruptions

Abstract

The severe impacts of disruptive events on real-world supply chains have attracted the researcher's attention on supply chain disruptions in the last decade. In the related literature, several strategies aimed at reducing the impact of disruptions have developed and analyzed. However, there exists no study which analyzes the effectiveness of pricing strategies in presence of disruptions on real-world supply chains to the best of our knowledge. Within this scope, a dynamic pricing approach is developed to mitigate stock-out risks aroused from disruptions. The rationale behind the proposed approach is to channel customer demand from a scarce product to a substitute product. The proposed approach is implemented in a retail supply chain. The computational results confirm the effectiveness of the dynamic pricing policy in the presence of disruptions.