BEHAVIOR-BASED PRICING CONSIDERING COMPETITION IN RETAIL SYSTEMS

Distribution systems are greatly vulnerable to demand uctuations, price of products, and customer's behavior due the complex nature of these systems. Moreover, companies target price discrimination by applying the customer's geographical location, purchase history, and special interests. Thus, a few changes in each factor can result in considerable eects on total prot and system's market share in competitive markets. Hence, considering pricing concept in these systems and also supply chains will improve their capabilities toward competency, exibility, and eciency in addition to appropriate handling of total costs. Here, the issue of pricing is at focus considering customers' behavior and the competitive environment. A novel mathematical model is developed to represent competition among the main entities in distribution systems (wholesaler and retailer) considering customer's behavior. This paper seeks to nd the optimal price of wholesaler and retailer and the optimal number of products transferred from each entity to another. The proposed model also aims to concentrate on prot maximization objective for the entities and utility maximization for the customers, simultaneously. In addition, customer's behavior is applied through this model by behavior-based price discrimination (BBPD) and utility function and the optimal competition equilibriums are obtained by dening the Stackelberg game (since the wholesaler is the leader and the retailers are the followers) in the form of bi-level programming. Finally, the model is solved using KKT optimality conditions. Using the associated equilibriums of the follower behavior-based pricing model and proving the level model convexity result in an integrated model for the second scenarios. Then, a linearization method is used to linearize the integrated model so that it can be solved by CPLEX solver in GAMS. The model is also validated by an experimental example and the sensitivity analyses were carried on the model to compare the dened scenarios and derive managerial insights and future research directions for further managers and practitioners.