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A three-level supply chain with warranty services, pricing and marketing decisions

A three-level supply chain with warranty services, pricing and marketing decisions This paper aims to present various three-level service contracts among the following three participants: a manufacturer, an agent and a customer. The interaction between the aforementioned participants will be modeled using the game theory approach. Under non-cooperative and cooperative games, the optimal sale price, warranty period and warranty price for the manufacturer and the optimal maintenance cost (repair cost) and marketing expenditure for the agent are obtained by maximizing their profits. The satisfaction of the customer is also maximized by being able to choose one of the suggested options from the manufacturer and the agent, based on the risk parameter.Design/methodology/approachThree-echelon supply chains with marketing and warranty services are studied. Game-theoretic approaches (non-cooperative and cooperative) are presented. The non-cooperative approaches are static (NE) and dynamic (Stakelberg) models. The cooperative approach is related to bargaining models (Nash bargaining games). The authors develop a sensitivity analysis of some parameters and their effect.FindingsBased on the mentioned drawbacks (i.e. lack of a model containing warranty, marketing and pricing), despite their importance, a developed model is proposed in this research to cover one of the research gaps. In addition, main contributions of this paper that differentiate it from the existing papers are regarding inventory, lost sale and lost goodwill, which are significant in the comparison environment. Another advantage of this study is related to the solution approach, the game theory. Twofold of the games theoretical, i.e. cooperative (in three forms) and non-cooperative are considered, because of their importance. Three types of non-cooperative games are presented as follows: Nash equilibrium – each echelon decides respectively and simultaneously; manufacturer-Stackelberg – the manufacturer has more power than the agent and the agent has more power than the customer; and customer-Stackelberg – customer is leader of the agent and the agent is the leader of manufacturer. The involved cooperative game in this paper is the bargaining problem that the participants can determine how to share the additional profits.Originality/valueIn this paper, various three-level service contracts will be presented among the following three participants: a manufacturer, an agent and a customer. The interaction between the aforementioned participants will be modeled using the game theory approach. Under non-cooperative and cooperative games, the optimal sale price, warranty period and warranty price for the manufacturer and the optimal maintenance cost (repair cost) and marketing expenditure for the agent are obtained by maximizing their profits. The satisfaction of the customer is also maximized by being able to choose one of the suggested options from the manufacturer and the agent, based on the risk parameter. Several numerical examples are used to illustrate the models presented in this paper. Finally, the authors develop a sensitivity analysis of some parameters and their effects on the objective functions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Modelling in Management Emerald Publishing

A three-level supply chain with warranty services, pricing and marketing decisions

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References (40)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1746-5664
DOI
10.1108/jm2-06-2018-0085
Publisher site
See Article on Publisher Site

Abstract

This paper aims to present various three-level service contracts among the following three participants: a manufacturer, an agent and a customer. The interaction between the aforementioned participants will be modeled using the game theory approach. Under non-cooperative and cooperative games, the optimal sale price, warranty period and warranty price for the manufacturer and the optimal maintenance cost (repair cost) and marketing expenditure for the agent are obtained by maximizing their profits. The satisfaction of the customer is also maximized by being able to choose one of the suggested options from the manufacturer and the agent, based on the risk parameter.Design/methodology/approachThree-echelon supply chains with marketing and warranty services are studied. Game-theoretic approaches (non-cooperative and cooperative) are presented. The non-cooperative approaches are static (NE) and dynamic (Stakelberg) models. The cooperative approach is related to bargaining models (Nash bargaining games). The authors develop a sensitivity analysis of some parameters and their effect.FindingsBased on the mentioned drawbacks (i.e. lack of a model containing warranty, marketing and pricing), despite their importance, a developed model is proposed in this research to cover one of the research gaps. In addition, main contributions of this paper that differentiate it from the existing papers are regarding inventory, lost sale and lost goodwill, which are significant in the comparison environment. Another advantage of this study is related to the solution approach, the game theory. Twofold of the games theoretical, i.e. cooperative (in three forms) and non-cooperative are considered, because of their importance. Three types of non-cooperative games are presented as follows: Nash equilibrium – each echelon decides respectively and simultaneously; manufacturer-Stackelberg – the manufacturer has more power than the agent and the agent has more power than the customer; and customer-Stackelberg – customer is leader of the agent and the agent is the leader of manufacturer. The involved cooperative game in this paper is the bargaining problem that the participants can determine how to share the additional profits.Originality/valueIn this paper, various three-level service contracts will be presented among the following three participants: a manufacturer, an agent and a customer. The interaction between the aforementioned participants will be modeled using the game theory approach. Under non-cooperative and cooperative games, the optimal sale price, warranty period and warranty price for the manufacturer and the optimal maintenance cost (repair cost) and marketing expenditure for the agent are obtained by maximizing their profits. The satisfaction of the customer is also maximized by being able to choose one of the suggested options from the manufacturer and the agent, based on the risk parameter. Several numerical examples are used to illustrate the models presented in this paper. Finally, the authors develop a sensitivity analysis of some parameters and their effects on the objective functions.

Journal

Journal of Modelling in ManagementEmerald Publishing

Published: Sep 18, 2019

Keywords: Marketing; Game theory; Warranty service; Three-level supply chain

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