Presenting a pricing model for the producers of steel with application of Game theory

Subject Areas : International Journal of Data Envelopment Analysis

Narges Shirafkan ¹ , Mohammad Mehdi Hosseinzadeh ²

1 - Department of Mathematics, Science and Research Branch, Islamic Azad University, Tehran, Iran
2 - Department of Economics, Statistics, and Finance, University of Calabria, Rende(CS), Italy

Received: 2022-08-02 Accepted : 2023-01-13 Published : 2023-02-01

Keywords: marketing, pricing, Game theory, Stackelberg Model, Nash equilibrium,

Abstract :

One of the most prevalent issues for managers is pricing. Pricing is one of the variables in the marketing mix and this parameter is directly associated with business income and is a fixable variable in the marketing mix. Therefore, management should be so sensitive about this variable because at this time market is in fierce competition. Most pricing studies in marketing assume that there is a stable relationship between a product’s price and its demand.Game theory is one of the methods that can guide the manager to find the best action and reaction as well as the best strategy that could lead to the most beneficial business.In this paper, we apply game-theoretical models (Stackelberg and Bertrand) to study competition and pricing management strategies to obtain optimal pricing strategies for the corresponding price gains under each strategy. We compare and contrast price gains under these two pricing strategies. Our results indicate that the optimal pricing strategy for competitive firms is governed by the Stackelberg model.

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