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Pricing decision with conspicuous customers: quick responses versus value-added services

Pricing decision with conspicuous customers: quick responses versus value-added services

Liu, Weihua, Wei, Wanying, Meili, Wang, Tang, Ou and Zhou, Li ORCID: 0000-0001-7132-5935 (2020) Pricing decision with conspicuous customers: quick responses versus value-added services. International Journal of Production Research. ISSN 0020-7543 (Print), 1366-588X (Online) (In Press) (doi:https://doi.org/10.1080/00207543.2020.1724341)

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Abstract

In order to eliminate the negative effects of customer strategic
behavior, retailers often adopt quick response or value-added services. While in a luxury market with conspicuous customers, retailers’ pricing decisions of these two strategies become more complicated. This paper studies a supply chain with a retailer serving a mixture of conspicuous and ordinary strategic customers. We develop three models so that the retailer provides i) neither quick response nor value-added services; ii) only quick response; iii) only value-added services. Subsequently, we analyze the impacts of conspicuous customers on quick response and value-added services by pricing and strategy comparisons. The model further extends to the situation including both strategies. The results show that, firstly, when the proportion is less than a threshold, the retailer should adopt a low price strategy, and vice versa. Besides, the quick response could induce the retailer to adopt high price while value-added services inhibit it. Secondly, the customer conspicuous behavior can motivate retailers to provide quick response and inhibit their value-added services. Finally, by observing the retailer’s decisions when they can adopt two strategies simultaneously, we find that the existence of quick response can amplify the benefits of value-added services.

Item Type: Article
Uncontrolled Keywords: pricing policy, behavioral operations management, retail supply chain, conspicuous customers
Subjects: H Social Sciences > H Social Sciences (General)
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Systems Management & Strategy
Faculty of Business > Networks and Urban Systems Centre (NUSC)
Faculty of Business > Networks and Urban Systems Centre (NUSC) > Connected Cities Research Group
Last Modified: 28 Feb 2020 10:50
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/26801

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