Market competition and pricing strategies in retail supply chains

Abstract

This study provides a better explanation for the continued prevalence of high–low (Hi–Lo) pricing strategy. We investigate the impact of market competition on adopting two different pricing strategies in the retail industry: everyday low price (EDLP) strategy and Hi–Lo strategy. We developed two analytic models using a game‐theoretic modeling approach: the profit maximization model and the sales revenue maximization model. We then conducted an econometric analysis based on retail store‐level dataset. The result shows that an EDLP player's equilibrium price depends highly on the cost level rather than competitor's price whereas the Hi–Lo player's equilibrium price depends mainly on the range of promotional basket as well as the cost level.

Analyzing multiple pricing decisions for substitutes under stochastic demand: An experiment

“…Moreover, to make the decision making a bit simpler, the demand realization for both flights is set to occur at the same percentile of the demand ranges, and this information is given to the decision makers. We have chosen this form of a demand function with higher self‐price elasticity and lower competitor‐price elasticity for its simplicity and also because this form is broadly used in environments where two competing products coexist in a market where both of their prices affect the demand of each (Chen et al, 2013; Dan et al, 2012; Park et al, 2020). The price ranges and capacity values are also chosen in accordance with earlier literature (e.g., Akbay & Ayvaz Cavdaroglu, 2021; Kocabıyıkoğlu et al, 2016).…”

Influence of showrooming and price matching strategy to combat showrooming under different costs

“…In addition, scholars have focused on the role and influencing factors of pricing strategies. Among the studies related to the role of pricing strategy, scholars examine the effects of pricing strategy on firm performance (Myers, 2004), retailer competition (Kopalle et al, 2009) and consumer search behavior (Zhou et al, 2022); among the studies on the factors influencing pricing strategy, scholars have focused on brand (Shankar and Bolton, 2004), consumers' strategic buying behavior (Wu et al, 2022) and competition (Kopalle et al, 2009;Park et al, 2020) as influencing factors of pricing strategy.…”

“…Scholars also use game theoretic models to compare different pricing strategies, such as personalized versus single pricing (Elmachtoub et al., 2021), random pricing versus flat price strategy (Wu et al., 2014), fixed versus variable pricing (Tang and Yin, 2007), consistent versus inconsistent pricing (Kong et al. , 2020) and everyday low price strategy versus high-low strategy (Park et al. , 2020).…”

“…, 2022) and competition (Kopalle et al. , 2009; Park et al. , 2020) as influencing factors of pricing strategy.…”

Joint pricing and replenishment policies for risk‐averse retailers under duopolistic competition

“…Xue et al (2019) discuss whether a manufacturer should provide buyback contracts to competing distributors. Park et al (2020) examine the price competition between two retailers following everyday low price strategy and high-low pricing strategy, respectively. Our study is consistent with the extant literature on retail competition, in which we further require each retailer to coordinate its pricing and replenishment strategies simultaneously.…”