Dynamic Pricing for Dual-Channel Supply Chain considering Consumers with Double-Entry Mental Accounting

Abstract

Based on double-entry mental accounting theory, we explore the effects of different payment schemes in the regular selling period and the sales period of two channels on the firm’s profits. Studies in psychology and behavioral sciences show that strategic consumers have a significant impact on firms’ profits. In this paper, dynamic pricing problems are considered to analyse the effects of strategic consumer double-entry mental accounting on firms’ profits. We first analyse the perceived values of consumers under different payment schemes in the regular selling period and the sales period from two channels. Based on this, we derive the optimal price and optimal profit. The results show that double-entry mental accounting of consumers has a greater impact on the retailer than on the manufacturer. To solve the loss caused by strategic consumers, it is recommended that the retailer lowers the price to stabilize the profit. The postpayment scheme is preferred by the manufacturer, but the high coefficient of pleasure attenuation would hurt the manufacturer. The general payment scheme is preferred by the retailer, but the high coefficient of pain buffering would hurt the retailer.