Optimal Pricing Policies for the Larger-scale Retailer and the Small-scale Retailer(Application)

Abstract

The present study investigates an oligopoly market in the circumstances where a large-scale retailer coexists with a small-scale retailer in a relatively small market. The large-scale retailer deals in foodstuffs (Commodity A) as well as other sorts of commodities such as sundries, clothes and electrical home appliances (Commodity B), while the small-scale retailer mainly sells Commodity A to his consumers. We formulate the price competition problem as Nash game between the two retailers to analyze the existence of equilibrium with respect to the selling price of Commodity A. The same problem is also formulated as Stackelberg game. Numerical examples are presented to illustrate the theoretical underpinnings of the proposed formulation.