Managing strategies of product quality and price based on trust under different power structures

Author:

Fu Xiao,Liu Shuchun,Shen Wendi,Han GuanghuaORCID

Abstract

This paper investigates the quality and pricing decisions in a supply chain consists of one retailer and two manufacturers. The retailer updates the trust value to manufacturers based on the historical information of product quality to determine the actual order quantity. We propose four game models by considering two situations, i.e., manufacturer-dominant scenario and retailer-dominant scenario. Based on theoretical and numerical analysis, we obtain a series of valuable management insights. For example, when a manufacturer with unreliable product quality is the leader and competes with another reliable manufacturer, the retailer’s profit would eventually surpass that of two stronger manufacturers. When the retailer is the leader, the retailer’s profit is often greater when two manufacturers engage in the Stackelberg game rather than that in Bertrand game, and the manufacturer with unreliable product quality can make profit no less than that of another manufacturer with reliable quality.

Funder

Soft Science Research Project of Zhejiang Province

National Natural Science Foundation of China

Zhejiang Statistical Research Project

Zhejiang Provincial Natural Science Foundation

Humanities and Social Science Fund of Ministry of Education of China

The central government of zhejiang province guides local science and technology development projects

Publisher

EDP Sciences

Subject

Management Science and Operations Research,Computer Science Applications,Theoretical Computer Science

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