Analysis of Optimal Strategies in a Two-Echelon Digital Products Supply Chain Considering Consumer Types
- PDF / 196,785 Bytes
- 3 Pages / 595.276 x 790.866 pts Page_size
- 64 Downloads / 212 Views
SHORT COMMUNICATION
Analysis of Optimal Strategies in a Two-Echelon Digital Products Supply Chain Considering Consumer Types Linlan Zhang1
•
Xianqi Peng1
Received: 2 March 2017 / Revised: 25 January 2019 / Accepted: 9 January 2020 The National Academy of Sciences, India 2020
Abstract Considering that the consumers are heterogeneous, we analyze pricing and investment strategies in a two-echelon supply chain of digital products which comprises a manufacturer and a retailer. Firstly, we construct demand function of digital product based on the consumer types by introducing product quality. Three different supply chain models are considered: vertical integration model, Cournot model, and manufacturer Stackelberg model. We study the players’ optimal strategies under these three models and focus on analyzing the effects of the players’ power balance on equilibrium optimal pricing and investment. We find the aggregated profits of both sides and investment cost are the highest in vertical integration model. The price of the digital product is the lowest in vertical integration model in most cases, as the customers hope. Finally, we offer managerial implications and direct the further work. Keywords Digital product Supply chain Optimal strategy Consumer types Game theory
With the rapid development of the Internet technology, digital products have held very large market share as a new type of product form. Previous research related to our paper can be mainly divided into two categories. The first category consists of the literature about digital rights management (DRM) protection and pricing strategies of digital products. The pioneering work in this area is the paper of Conner and Rumelt [1]. See [2–4] for other major & Linlan Zhang [email protected] 1
School of Business, Hubei University, Wuhan 430062, China
researches. The second category of research mainly focuses on analysis of the interaction between the supply chain members by a game approach. There have three major game models: (1) both sides act in cooperation (see [5]); (2) both sides act in noncooperation, and there is a symmetrical power balance between both sides (see [6]); (3) both sides act in noncooperation, and power balance is asymmetrical (see [7, 8]). This paper provides a comprehensive analysis of the above three models. First, we consider a single-echelon model in a digital product supply chain with vertical integration. This model is denoted VI hereafter. Such models were adopted by Skype and RealPlayer that distribute the for-pay software offerings to the users via the internet. Second, we model simultaneous decisions in a two-echelon supply chain which is similar to the Cournot model. This model is denoted Cournot model hereafter. Third, we assume that manufacturer is a leader which is denoted manufacturer–Stackelberg (MS) model hereafter. For example, Microsoft is such a software manufacturer that dominates the market and has a stronger power than the retailers who sell their products. Firstly, we construct a model of a manufa
Data Loading...
