Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/19604
Title: Price wall or war : the pricing strategies for retailers
Authors: Chiu, CH
Choi, TM 
Li, D
Keywords: Game theory
Price war
Pricing game
Retailing
Service level
Issue Date: 2009
Publisher: Institute of Electrical and Electronics Engineers
Source: IEEE transactions on systems, man, and cybernetics. Part A, Systems and humans, 2009, v. 39, no. 2, p. 331-343 How to cite?
Journal: IEEE transactions on systems, man, and cybernetics. Part A, Systems and humans 
Abstract: In this paper, we apply the game theory to study some strategic actions for retailers to fight a price war. We start by modeling a noncooperative pure pricing game among multiple competing retailers who sell a certain branded product under price-dependent stochastic demands. A unique Nash equilibrium is proven to exist under some mild conditions. We demonstrate mathematically the incentives for retailers to start a price war. Based on a strategic framework via the game theory, we illustrate the use of service level to build price walls which can prevent a huge drop in price, as well as profit. Three kinds of price walls are proposed, and the respective strengths and weaknesses have been studied. Analytical conditions, under which a price wall can effectively prevent big drops in both market share and profit, are developed. Aside from the proposed price walls, two other pricing strategies, which can lead to an all-win situation, are examined.
URI: http://hdl.handle.net/10397/19604
ISSN: 1083-4427
EISSN: 1083-4419
DOI: 10.1109/TSMCA.2008.2010753
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