A game theoretic approach for novel pricing mechanism in a duopolistic supply chain considering price shock, market forecasting, customer behavior, and tax deduction policy
Volume 11, Issue 1, July 2024, Pages 140-155
https://doi.org/10.22116/jiems.2024.433133.1545
Zahra Hajirahimi
Abstract Today, due to the instability in the various markets, the modeling of price shock becomes the challenging task due to continuous price changes caused by numerous external factors. Therefore, in this paper, a novel pricing mechanism for manufacturers who produces substitution products in a duopoly is proposed considering price shock, market prediction and customer behavior. Consequently, a game theory approach based on the Cournot model is designed to determine the equilibrium decisions. To extract managerial insights, Nash and Stackelberg approaches investigated in two scenarios before and after occurring price shock, considering the behavior of manufacturers and consumers. Moreover, the government policies are investigated in these two scenarios. The obtained results from parametric analysis indicated that the market forecasting parameter plays a significant role in the profitability and production quantity of manufacturers in both scenarios. Besides, the tax deduction policy provides better conditions for the government only before occurring price shock.