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Chinese Journal of Management Science ›› 2022, Vol. 30 ›› Issue (11): 95-104.doi: 10.16381/j.cnki.issn1003-207x.2020.0476

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Robust Pricing Issues in a Two-layer Supply Chain under an Uncertain Demand

HOU Fu-jun3, SUN Zhong-yuan2   

  1. 1. School of Management Science and Engineering, Anhui University of Technology, Maanshan 243032, China;2. School of Economics and Management, Xi’an University of Posts and Telecommunications, Xi’an 710121, China;3. School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China
  • Received:2020-03-25 Revised:2020-07-25 Online:2022-11-20 Published:2022-11-28
  • Contact: 孙中原 E-mail:sunzyuan0512@sina.com

Abstract: In practice, the potential demand and the price-sensitivity coefficient sometimes are unknown to decision-makers. In this scenario, deterministic optimal strategies no longer pertain. In order to deal with this type of issue, robust pricing issues of a manufacturer and a retailer in a two-echelon supply chain in the presence of an uncertain potential demand and an uncertain price-sensitivity coefficient are investigated. The potential demand and the price-sensitivity coefficient are expressed as interval parameters, and both the decision-makers are assumed to be risk averse. Firstly, the complete-information case is discussed so as to offer comparable results for the following cases. Secondly, the asymmetric-information situation is analyzed in which the retailer possesses complete information while the manufacturer only knows partial information about the market demand. A Stackelberg robust game model is constructed for this case and the unique equilibrium solution is acquired. It is shown that the retailer gains advantages by the asymmetric information. Thirdly, the incomplete-information situation is analyzed in which both the manufacturer and the retailer only know the intervals of the uncertain parameters. Similarly, a Stackelberg robust game model is built and the solution is obtained. By comparing the acquired results, the condition which guarantee the manufacturer is shown and the retailer gain more profits in the incomplete-information case than the one in the complete-information case. Under this condition, there is no need both for the manufacturer and the retailer to spend costs to obtain accurate information. Further, it is demonstrated that the manufacturer gains more profit in the incomplete-information situation than in the asymmetric-information situation, while the retailer is just the opposite. The obtained results give practical solutions for the manufacturer and the retailer, when at least one is not aware of exact parameters. Actually, robust pricing methods proposed in this paper are also available in other pricing scenarios when decision-makers are risk averse.

Key words: incomplete information; interval parameters; robust pricing; Stackelberg game; asymmetric information

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