Price Formation Mechanisms and Its Stability in Channel with Differentiated Product under Different Control Pattern

Abstract

This article presents the study of price formation mechanisms and the stability in distribution channels with differentiated products. First, the price settings are given under four different control patterns. The analysis result of price formation mechanism shows that the control pattern of distribution channel influences the price setting and the payoff of every player. Finally, we analyses the stability of the price setting and identify out the stability status. For unstable price formation, the critical discount factor is computed out.