Research on Price Wars in Supply Chain Networks Based on Multistage Evolutionary Prisoner's Dilemma Game

Abstract

In this paper, we extend price wars to supply chain networks (SCNs), focusing on how price wars affect the performance of SCNs and how to contain a price war. We propose a computational model in which the price competition is modelled as a multistage evolutionary prisoner's dilemma game between business-related neighbors in each stage of the SCN, and the temptation to defect of the prisoner's dilemma game is modelled as a function of the quotation price, which couples the price competition and the dynamic of the SCN. It is found that the price defectors' exposure rate is the key factor causing price war of the SCN, and only a large proportion of firms in a closely related industry join the price alliance, and the price war in the SCN can be contained effectively.