Proceedings of the 9th International Conference on Operations and Supply Chain Management, Vietnam, 2019

ISBN: 9786027060470


The Effect of Pricing Strategies on Retailers: An Agent-Based Modeling Approach

Niniet I. Arvitrida
Institut Teknologi Sepuluh Nopember

Adji Candra
Institut Teknologi Sepuluh Nopember

Nurhadi Siswanto
Institut Teknologi Sepuluh Nopember

Lila Yuwana
Institut Teknologi Sepuluh Nopember

Setting the prices for products is an essential approach for retailers to define their business success. However, there is a high uncertainty that characterizes pricing decisions. Interdependent behavior between retailer and customers making it hard to analyze the effect of a pricing strategy on retailers. The complexity increases when the customer behavior can be influenced by pricing strategies implemented by the competitors. This study examines the impact of pricing strategies on retailers by using agent-based simulation. The pricing strategies investigated are related to price promotion, which is defined based on the promotion frequency and the level of the price cut. Two types of agent are defined in the model, namely retailer and customer. The customers have a particular buying preference and a dynamic utility function, while the retailers apply either a similar pricing strategy (homogeneous agents) or different strategies (heterogeneous agents). A functional product market is considered, which represents items that are bought regularly for daily needs, such as foodstuff and toiletries. Preliminary results presented in this paper are reported for the purpose of illustration. These show that the bounded-rationality of each agent drives the emergent outcomes, and each pricing strategy results in a different impact on retailers, in terms of market share. The contribution of this study is to offer a new point of view in understanding the impact of pricing strategies on retailers.

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@InProceedings{Arvitrida2019_OSCMConference_116,
    author = {Arvitrida, Niniet I. and Candra, Adji and Siswanto, Nurhadi and Yuwana, Lila},
    title = {The Effect of Pricing Strategies on Retailers: An Agent-Based Modeling Approach},
    booktitle = {Proceedings of the 9th International Conference on Operations and Supply Chain Management, Vietnam, 2019},
    year = {2019},
    doi = {NaN}
}

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