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Pricing strategy and product quality design with platform-investment

  • * Corresponding author: Gongbing Bi

    * Corresponding author: Gongbing Bi 

The research is supported by the Key Program of the National Natural Science Foundation of China [Grant Number: 71731010], the National Natural Science Foundation of China [Grant Number: 72171214, 71571174, 72101003, 71801203], the Key Research and Development Project of Anhui Province [Grant Number: 201904a07020040], the Key Education Department Project of Anhui Province [SK2020A0388] and Key Project of West Anhui University [wxsk201923]

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  • With the development of business, more consumers are quality sensitive and improving the product quality becomes particularly important. We mainly discuss two investment strategies: retailer-investment and platform-investment. Compared with non-investment case, only if consumer sensitivity is not too high, it is profitable for the retailer to select retailer-investment. When both retailer-investment and platform-investment are viable, the choice of investment mechanism depends on the profit-sharing ratio. Particularly, if the ratio is within a certain range, the optimal investment strategy is platform-investment, achieving a triple-win outcome. Besides, to effectively alleviate the contradiction between the retailer's moral hazard problem and the sustainable value-added effect of platform-investment, we further research the contract term. These results give us some meaningful management inspirations in investment mechanism.

    Mathematics Subject Classification: Primary: 90B50; Secondary: 90B60.


    \begin{equation} \\ \end{equation}
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  • Figure 1.  The impact of $ \lambda $ on decision variables

    Figure 2.  The impact of $ \lambda $ and $ \theta $ on balance profit

    Figure 3.  The impact of $ \theta $ on supply chain performance

    Figure 4.  The impact of $ \theta $ on supply chain performance

    Table 1.  Notations

    Variables Description
    $ U $ The utility that a consumer derives from the product
    $ V $ The consumer's utility from the product functional attributes
    $ p_{i} $ The unit retail price of the product under different scenarios,
    which is a decision variable of the retailer, where $ i=NI,RI,PI $
    $ c $ The unit cost of the product
    $ \lambda $ Consumer sensitivity to the quality-improvement product
    $ e_i $ The product quality-improvement level, which is a decision
    variable of the retailer or platform, where $ i=RI,PI $
    $ k $ The product quality-improvement cost parameter of the retailer
    $ \beta $ The product quality-improvement cost parameter of the platform
    $ \theta $ The profit-sharing ratio given by the platform
    $ \pi_i $ The retailer's profit, where $ i=NI,RI,PI $
    $ \Pi_i $ The platform's profit, where $ i=PI $
     | Show Table
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