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Evolutionary stability of pricing strategies in a retail market with service

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3 Author(s)
Kuiran Shi ; Sch. of Manage. Sci. & Eng., Nanjing Univ., China ; Tiaojun Xiao ; Zhaohan Sheng

This paper analyzes the evolutionary stability of pricing strategies in a retail market by adopting an indirect evolutionary approach. We consider one population consisting of retailers who randomly compete with each other in pairs. Given their strategies (preferences), retailers rationally choose service level to maximize their utilities. We describe the interaction by a symmetric game and derive the conditions under which the pricing strategies are evolutionary stable. It is shown that the outcome mainly depends on the market scale, the substitutability coefficient of strategic interaction and the corresponding probability of promotional pricing strategy. We present the evolutionary stable strategies, service levels and profits of the retailers by numerical examples.

Published in:

Services Systems and Services Management, 2005. Proceedings of ICSSSM '05. 2005 International Conference on  (Volume:2 )

Date of Conference:

13-15 June 2005