Joint Decision On Pricing And Advertising For Competing Short-life-cycle Products Under Emergency Purchasing

With the rapid development of the global economy, market competitionbecomes fierce increasingly. In order to gain a competitive advantage and greater economicbenefits, companies often compete with their rivals from multiple or different angles at thesame time. To address the issues associated with management practices, this paper extendsthe basic problem of the classical newsboy under emergency purchases and stochasticdemand, introduces price and advertising as decision variables and calculates theequilibrium decision variables of the enterprises and the optimal profit, this study is animportant part of supply chain management research. Specifically, this paper investigates aninventory decision problem under price and advertising dependent demand, and considers ajoint decision on pricing and advertising for competing retailer who operates short-life-cycleproducts under emergency purchasing. We analyze the retailers’ advertising decision undera monopoly and a competitive market environment, respectively.In a monopoly market environment, we assume retailers could choose one from threestrategies: No Advertising Strategy, Traditional Advertising Strategy and Group BuyingStrategy. Firstly, No Advertising Strategy is set as a benchmark model. Then we calculatethe equilibrium stock results under Traditional Advertising Strategy Model and GroupBuying Strategy Model and prove the existence of the equilibrium price and advertisinginvestment. Finally, we discuss the advantages of the retailer’s strategy selection. The resultsindicate that compared to No Advertising Strategy, if the retailer chooses TraditionalAdvertising Strategy or Group Buying Strategy his profits can be improved.In a competitive market environment, we assume two retailers sell two products thatare under a similar function with a higher substitutability, and analyze their joint decisionsaccordingly. Retailer advertising has seven possible outcomes: neither retailer advertises,only Retailer1launches traditional advertising, only Retailer2launches traditionaladvertising, both retailers launch traditional advertising, only Retailer1launches GroupBuying, only Retailer2launches Group Buying, both retailers launch Group Buying. First,each model is developed and solved, we can obtain the equilibrium of each model. Then wemake game analysis and get optimal strategies. The results show that the retailer alwaysprefers to Advertise Strategy (Traditional Advertising Strategy or Group Buying Strategy).Compared to the strategy of neither retailer advertises, a retailer who chooses the strategy ofonly one retailer launches traditional advertising or Group Buying can not only improve hisown income, but also will increase the volume of sales of the competitor. If the retailerchooses the strategy of both retailers launch traditional advertising or Group Buying, the profits of retailers will further expand. Comprehensive comparison of the above sevenequilibrium model, the results can be possible conclude that the strategy of both retailerslaunch traditional advertising is the dominant strategy.