Price Stickiness in a Dual-Channel Supply Chain

Saglam, Ismail (2023): Price Stickiness in a Dual-Channel Supply Chain.

Abstract

In this paper, we study price stickiness in a dual-channel supply chain where a single manufacturer sells its product through an online channel and a retailer. We construct a noncooperative game where the manufacturer and the retailer decide on whether or not to costlessly adjust their prices after a demand shock. If the demand shock is positive, then the Nash equilibrium is always unique and non-sticky. If the demand shock is negative, then there exist Nash equilibria where some prices are sticky. Moreover, no Nash equilibrium is always Pareto optimal, pointing to the possibility of the Prisoner's Dilemma.

• Item Type: MPRA Paper
• Language: English
• Keywords: Supply chain; price adjustment; price stickiness.
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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