Dynamic Pricing in Cloud Manufacturing Systems under Combined Effects of Consumer Structure, Negotiation, and Demand

Abstract

In this study, we proposed a game-theory based framework to model the dynamic pricing process in the cloud manufacturing (CMfg) system. We considered a service provider (SP), a broker agent (BA), and a dynamic service demander (SD) population that is composed of price takers and bargainers in this study. The pricing processes under linear demand and constant elasticity demand were modeled, respectively. The combined effects of SD population structure, negotiation, and demand forms on the SP’s and the BA’s equilibrium prices and expected revenues were examined. We found that the SP’s optimal wholesale price, the BA’s optimal reservation price, and posted price all increase with the proportion of price takers under linear demand but decrease with it under constant elasticity demand. We also found that the BA’s optimal reservation price increases with bargainers’ power no matter under what kind of demand. Through analyzing the participants’ revenues, we showed that a dynamic SD population with a high ratio of price takers would benefit the SP and the BA.