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Chinese Journal of Management Science ›› 2022, Vol. 30 ›› Issue (8): 82-94.doi: 10.16381/j.cnki.issn1003-207x.2019.2112

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Dynamic Game Analysis of Manufacturer RFID Adoption and Retailer Parallel Importation

DING Long1, HU Bin2, CHANG Shan3   

  1. 1. School of Management Science and Engineering, Nanjing University of Information Science and Technology, Nanjing 210044, China;2. School of Management, Huazhong University of Science and Technology, Wuhan 430074, China;3. School of Information Management and Statistics, Hubei University of Economics, Wuhan 430074, China
  • Received:2019-12-19 Revised:2020-03-14 Online:2022-08-18 Published:2022-08-18
  • Contact: 常珊 E-mail:changshan33@163.com

Abstract: A dynamic game between a manufacturer and a retailer is investigated in this paper. A supply chain with two separate markets is considered, namely, high-end market H and low-end market L. The manufacturer sells product directly to high-end market H, but indirectly to low-end market L through the retailer. Gray market emerges when a product is parallel imported from low-end market to high-end market by the retailer. In addition to the pricing decisions, the manufacturer decides whether and under what conditions to adopt RFID, and the retailer determines whether to parallel import. Through solving a dynamic game model, several findings are revealed. First, RFID can effectively combat retailer’s parallel importation. In the absence of RFID, retailer’s parallel importation always decreases manufacturer’s profits. However, in the presence of RFID, it not only reduces the negative of parallel importation on manufacturer, but also makes manufacturer benefit from parallel importation under some conditions. Second, although RFID can deter retailer’s parallel importation, the manufacturer does not always adopt it. When the market disparity between high-end market and low-end market is sufficient small, the manufacturer does not adopt RFID. When the market disparity is moderate, the manufacturer adopts RFID if the RFID penalty effect is relatively strong or RFID penalty effect is relatively weak and RFID cost effect is moderate. When the market disparity is sufficient large, the manufacturer adopts RFID if the RFID penalty cost is high or RFID unit cost is high or both. Finally, it is explored that the impacts of RFID and parallel importation have two sides. Parallel importation increases social welfare in the case of without adopting RFID. While in the case of with adopting RFID, parallel importation increases social welfare only under certain conditions, which implies that parallel importation may be harmful to social welfare once the manufacturer adopts RFID.

Key words: RFID; parallel import; gray market; supply chain management; game theory

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