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Pricing design and contract selection with customers’ self-control: a strategic analysis

Gao Yuwei (School of Management, University of Science and Technology of China, Hefei, China)
Yuan Chen (School of Management, University of Science and Technology of China, Hefei, China)
Yangguang Zhu (School of Economics, Hefei University of Technology, Hefei, China)
Shaofu Du (School of Management, University of Science and Technology of China, Hefei, China)

Journal of Modelling in Management

ISSN: 1746-5664

Article publication date: 31 March 2022

Issue publication date: 31 March 2023

325

Abstract

Purpose

The purpose of this paper is to examine how customers’ self-control affects their purchase decisions and to discuss the pricing decisions of the retailer under different forms of contract.

Design/methodology/approach

The authors use the literature on hyperbolic discounting to model customers’ self-control problems. In this framework, the authors examine how the customers’ self-control affects the optimal pricing decision and the selection of the optimal contract form when there is a supplier and a retailer in the supply chain.

Findings

The study’s results show that when wholesale price contract is compared with buyback contract, buyback contract is better when customers’ self-control is weak; when quantity-discount contract is compared with wholesale price contract and buyback contract, although quantity discount can encourage customers to purchase more units of products, but both wholesale price contract and buyback contract can be better than quantity-discount contract in some cases. Additionally, the authors demonstrate that revenue sharing contract can increase the supply chain’s profit. The authors also find that sometimes customers’ preplan will lead to the result that the supplier produces more unhealthy products.

Originality/value

To the best of the authors’ knowledge, this is the first study to analyze the decision-making of the retailer by developing an analytical framework combining customer’s self-control and supply chain contract. These results have important implications for the supplier and the retailer that sell vice goods.

Keywords

Acknowledgements

This research was supported by the National Natural Science Foundation of China (Grant Nos. 71801073, 72071193) and the Fundamental Research Funds for the Central Universities (Grant Nos. JZ2018HGBZ0112, WK2040000027).

Citation

Yuwei, G., Chen, Y., Zhu, Y. and Du, S. (2023), "Pricing design and contract selection with customers’ self-control: a strategic analysis", Journal of Modelling in Management, Vol. 18 No. 2, pp. 480-502. https://doi.org/10.1108/JM2-09-2021-0219

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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