Seller-buyer relationship when end demand is sensitive to price and promotion

Seller-buyer relationship when end demand is sensitive to price and promotion

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Article ID: iaor20103066
Volume: 26
Issue: 5
Start Page Number: 605
End Page Number: 621
Publication Date: Oct 2009
Journal: Asia-Pacific Journal of Operational Research
Authors: , ,
Keywords: game theory
Abstract:

In this paper, we consider a seller–buyer channel in which marketing expenditure is an endogenous decision for the buyer. We assume that both the unit marketing expenditure and the unit price charged by the buyer influence the end demand for the product. We model the seller–buyer relationship as a non-cooperative as well as a cooperative game. We investigate the non-cooperative game from two perspectives: the Seller–Stackelberg model and the Buyer–Stackelberg model. In the cooperative game, we provide a procedure for outlining Pareto efficient solutions. For each model, we present a numerical example as well as sensitivity analysis with respect to the two key parameters in the model.

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