Pricing And Investing Strategies Of Firms In A Dynamic Environment

The ever-increasing technology advancement has greatly enhanced the possibility for firms to adopt dynamic pricing and investing strategies.This dissertation applies optimal control and differential game theories to investigate firms’ pricing and investing strategies in a dynamic environment.The detailed contents are as follows:First,this thesis studies the joint dynamic pricing and preservation technology in-vestment strategy for perishable foods.An inventory model for perishable foods is formulated,where a retailer uses preservation technology investment to reduce the de-terioration rate of food quality,and the demand depends on the price and quality that decays continuously.The objective is to determine a joint dynamic pricing and preser-vation technology investment strategy while maximizing the profit from selling a given initial inventory of perishable foods.First,based on Filippov-Cesari theorem,the ex-istence of an optimal solution is proven.Then,Pontryagin’s maximum principle is used to obtain all the candidates,and the conditions that make a certain candidate be an optimal solution are provided.Next,an effective algorithm is given to search for the op-timal strategy.Finally,two numerical examples are employed to illustrate the solution procedure and the results,followed by sensitivity analysis and managerial insightsNext,this thesis investigates the effects of administered and negotiated transfer pricing on the strategies and profits of each center within a firm and the profits of the whole firm,and meanwhile studies the firm’s coordination mechanisms.Specifically,consider a firm consisting of an operations department and a marketing department.The operations department is responsible for the quality improvement of a product and sells this product to customers through the marketing department which decides the retail price and advertising effort.The firm’s goodwill is affected by product quality and advertising effort,and market demand is impacted by product price,quality and goodwill.The results suggest that compared with the administered transfer pricing,the negotiation transfer pricing leads to a higher transfer price,and then a higher retail price,lower advertising effort and higher quality improvement effort.What’s more,the two decentralized departments can be coordinated by a committed dynamic transfer price of the operations department,and both departments and the whole firm can benefit from this coordination.Then,this thesis studies the effects of farsightedness and myopia of supply chain members on price-quality relationships in the presence of reference-quality effects.Consider a supply chain consisting of a manufacturer and a retailer,in which the man-ufacturer distributes a product through the retailer to consumers who are affected by reference-quality effects.The manufacturer decides the product quality and wholesale price,while the retailer sets the retail price.The two members implement a revenue-sharing contract.The results suggest that relative to the manufacturer s farsightedness,its myopia leads to a higher product quality,retail price and quality-price ratio which benefits consumers.Meanwhile,myopia results in a more quality-sensitive but less price-sensitive market demand.What s more,although the manufacturer is apt to adopt far-sighted strategies,the retailer is not always willing to cooperate with a far-sighted manufacturer.When the marginal contribution of product quality on demand is relative-ly large and the revenue-sharing proportion is relatively low,taking myopic strategies for both members is likely to gain a higher supply chain profit.Finally,this thesis investigates the effects of reselling and agency selling formats on firms’dynamic pricing and quality improvement strategies.Consider a supply chain consisting of a manufacturer and a retailer,where the manufacturer controls its prod-uct s quality improvement investment and sells the product to customers through the retailer.Under the reselling format,the manufacturer decides the wholesale price and the retailer sets the retail price;under the agency selling format,the manufacturer sets the retail price and the retailer decides the agency fee from per unit of sales.Quali-ty evolution is used to characterize the dynamic environment,and market demand is affected by price and quality.Comparing the equilibrium results under both formats shows that when the effectiveness of quality investment is relatively high(low),agency selling leads to a higher(lower)product quality,and meanwhile the manufacturer ob-tains a higher(lower)profit.Moreover,agency selling may result in a high-quality but low-price product.