Joint dynamic pricing and preservation technology investment for an integrated supply chain with reference price effects

Abstract

In this paper, we propose a system of joint dynamic pricing and preservation technology investment decisions for deterioration items in an integrated supply chain management environment involving a manufacturer and a retailer, a controllable deterioration rate, and price-dependent demand. Because the purchasing decisions of consumers usually involve psychologically encoded prices based upon past shopping experiences, the effects of initial reference prices are also incorporated into the proposed model. An optimal dynamic pricing and preservation technology investment model is then established to determine joint strategy, maximizing the discounted total profit over an infinite time horizon from the perspectives of the retailer and integrated supply chain. We also characterize the properties of the optimal pricing and preservation technology investment decisions, and conduct numerical studies to investigate the impact of initial reference price and various system parameters on the optimal strategies and discounted total profit for the retailer/integrated supply chain. Finally, we offer concluding remarks and suggestions for future studies.

Keywords:

• Dynamic pricing
• preservation technology investment
• integrated supply chain
• reference price effects

Acknowledgements

The authors would like to thank the editor and anonymous reviewers for their valuable and constructive comments, which have led to a significant improvement in the manuscript.

Notes

Please note this paper has been re-typeset by Taylor & Francis from the manuscript originally provided to the previous publisher.