Price Decision in the Supply Chain of One Product Family with Price-dependent Demand

Abstract

In response to different custom preferences and fast product life cycle, manufacturers add numerous product variants which are composed to be a product family. Some components in one product family can be shared and reused for time and cost reduction in design and manufacturing. The paper provides mathematical models for sale price decision in the multistage supply chain of one product family under the stochastic and price-dependent demand environment. With these proposed mathematical models and the specific case involving a product family of cordless drills, the paper studies how different decision-makers, i.e., the manufacturer, the retailer, or both, how different price-dependent demand models, and how component commonality in the product family affect the sale price decision and the supply chain performance in profit.