Supply chain pricing decisions with price reduction during the selling season

For most seasonal products such as fashion clothes, vogue handbags, style cell phones and so on, there are usually price reductions during the selling seasons. With such a skimming price strategy, a retailer can not only capture more consumers’ surplus, but also form a higher reference price in consumers’ mind. To investigate the impact of reference price effects on the supply chain decisions, in this paper we propose a two-period pricing model with such price reduction for a supply chain consisting of a single manufacturer and a single retailer. Besides the optimal decisions for the scenario that the two channel members integrate together (the I-Scenario), we derive the equilibrium pricing decisions of the two channel members in three different scenarios, i.e. the N-Scenario (no quick response ability), the F-Scenario (full quick response ability) and the L-Scenario (limited quick response ability), representing the supply chain’s different ability in quick response. Analysis and comparison not only illustrate the impact of reference price effects on the price decisions of the two channel members, but also show the benefit of a supply chain’s quick response ability. We also introduce some contacts to coordinate the supply chain.