TITLE:
Optimal Price Strategy under Price-Matching Policy
AUTHORS:
Vivian Okere, Wen Chen
KEYWORDS:
Price-Matching Policy, Optimal Pricing, Retail Management
JOURNAL NAME:
Journal of Applied Mathematics and Physics,
Vol.8 No.12,
December
23,
2020
ABSTRACT: The paper explores the optimal price strategy under the price-matching policy. First, the paper formulates the demand function under the price match policy and then discovers the retailer’s best response facing the price-matching pressure. From the theoretical analysis, we discover how the number of retailers plays an important role during the competition. When only two retailers are involved, the final prices may not converge to a single value. However, when more retailers are involved, the final price will converge to a single value. We also use numerical studies to illuminate the change of the prices over the time period, the sensitivity of the final price to the increment/decrement of initial prices. Finally, we provide managerial suggestions to both producers and retailers.