Pricing strategy of supply chain considering response time of extended warranty service
Extended warranty services (EWS) offers avenues for new profit sources and growth opportunities. In a time-sensitive market, the response time has an important impact on the pricing of EWS and satisfying consumer utility. Applying Stakelberg Game theory, a two-echelon product-service supply chain co...
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| Language: | English |
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Elsevier
2025-06-01
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| Series: | Operations Research Perspectives |
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2214716025000065 |
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| author | Xingjian Zhou Yan Feng Hongming Chen Lihua Cai Vladimir Bashkarev |
| author_facet | Xingjian Zhou Yan Feng Hongming Chen Lihua Cai Vladimir Bashkarev |
| author_sort | Xingjian Zhou |
| collection | DOAJ |
| description | Extended warranty services (EWS) offers avenues for new profit sources and growth opportunities. In a time-sensitive market, the response time has an important impact on the pricing of EWS and satisfying consumer utility. Applying Stakelberg Game theory, a two-echelon product-service supply chain consisting of a manufacturer and two retailers (Self-owned, Franchised) is construct. Considering the EWS response time and price to characterize the consumer utility function, the EWS pricing strategies in different market stages are studied based on the scenarios of identical response time (IRT) and different response time (DRT). The research shows that: (1) under IRT scenario, the optimal EWS pricing and cost of the self-owned and franchised retailers are negatively related to the response time, therefore, both retailers should consider a trade-off strategy between the EWS price and the response time; (2) under DRT scenario, an EWS response time threshold exists, based on which the self-owned and franchised retailers should develop the optimal EWS pricing strategies; (3) under DRT scenario, the retailers’ optimal EWS prices have a negative relationship with consumers’ price sensitivity coefficient, and a positive relationship with consumers’ time sensitivity coefficient. The manufacturer and the self-owned retailer can significantly reduce EWS response time with a limited increase in the prices. While the franchised retailer need to follow the self-owned retailer in developing its pricing strategy. The study construct a time-sensitive consumer utility function by integrating response time and pricing, more accurately portraying the expected value of EWS. Based on the market characteristics of EWS growth and maturity periods, the EWS pricing strategies are expanded regarding response time differentiation in multiple cycles. It helps companies better understand consumer demand for EWS, and assists them in formulating pricing strategies for different stages of EWS market development,and improving EWS supply chain management. |
| format | Article |
| id | doaj-art-eef23ac5754246fb97e6669f5fa82598 |
| institution | Kabale University |
| issn | 2214-7160 |
| language | English |
| publishDate | 2025-06-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Operations Research Perspectives |
| spelling | doaj-art-eef23ac5754246fb97e6669f5fa825982025-08-20T03:47:13ZengElsevierOperations Research Perspectives2214-71602025-06-011410033010.1016/j.orp.2025.100330Pricing strategy of supply chain considering response time of extended warranty serviceXingjian Zhou0Yan Feng1Hongming Chen2Lihua Cai3Vladimir Bashkarev4School of Management, Wuhan Textile University, Wuhan 430200, China; Enterprise Decision Support Research Center, Key Research Base of Humanities & Social Sciences of Hubei Province, Wuhan 430073, China; Digital & Intelligent Logistics & Textile & Garment Supply Chain Management Research Center, Industry-University-Research Base of China Logistics Society, Wuhan 430200, ChinaSchool of Management, Wuhan Textile University, Wuhan 430200, China; Digital & Intelligent Logistics & Textile & Garment Supply Chain Management Research Center, Industry-University-Research Base of China Logistics Society, Wuhan 430200, China; Corresponding author.School of Management, Wuhan Textile University, Wuhan 430200, ChinaEcological Environment Industry College, Wuhan University of Technology and Business, Wuhan 430065, ChinaSchool of Management, Wuhan Textile University, Wuhan 430200, ChinaExtended warranty services (EWS) offers avenues for new profit sources and growth opportunities. In a time-sensitive market, the response time has an important impact on the pricing of EWS and satisfying consumer utility. Applying Stakelberg Game theory, a two-echelon product-service supply chain consisting of a manufacturer and two retailers (Self-owned, Franchised) is construct. Considering the EWS response time and price to characterize the consumer utility function, the EWS pricing strategies in different market stages are studied based on the scenarios of identical response time (IRT) and different response time (DRT). The research shows that: (1) under IRT scenario, the optimal EWS pricing and cost of the self-owned and franchised retailers are negatively related to the response time, therefore, both retailers should consider a trade-off strategy between the EWS price and the response time; (2) under DRT scenario, an EWS response time threshold exists, based on which the self-owned and franchised retailers should develop the optimal EWS pricing strategies; (3) under DRT scenario, the retailers’ optimal EWS prices have a negative relationship with consumers’ price sensitivity coefficient, and a positive relationship with consumers’ time sensitivity coefficient. The manufacturer and the self-owned retailer can significantly reduce EWS response time with a limited increase in the prices. While the franchised retailer need to follow the self-owned retailer in developing its pricing strategy. The study construct a time-sensitive consumer utility function by integrating response time and pricing, more accurately portraying the expected value of EWS. Based on the market characteristics of EWS growth and maturity periods, the EWS pricing strategies are expanded regarding response time differentiation in multiple cycles. It helps companies better understand consumer demand for EWS, and assists them in formulating pricing strategies for different stages of EWS market development,and improving EWS supply chain management.http://www.sciencedirect.com/science/article/pii/S2214716025000065Response timeExtended warranty service (EWS)Pricing strategyProduct-service supply chain |
| spellingShingle | Xingjian Zhou Yan Feng Hongming Chen Lihua Cai Vladimir Bashkarev Pricing strategy of supply chain considering response time of extended warranty service Operations Research Perspectives Response time Extended warranty service (EWS) Pricing strategy Product-service supply chain |
| title | Pricing strategy of supply chain considering response time of extended warranty service |
| title_full | Pricing strategy of supply chain considering response time of extended warranty service |
| title_fullStr | Pricing strategy of supply chain considering response time of extended warranty service |
| title_full_unstemmed | Pricing strategy of supply chain considering response time of extended warranty service |
| title_short | Pricing strategy of supply chain considering response time of extended warranty service |
| title_sort | pricing strategy of supply chain considering response time of extended warranty service |
| topic | Response time Extended warranty service (EWS) Pricing strategy Product-service supply chain |
| url | http://www.sciencedirect.com/science/article/pii/S2214716025000065 |
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