Two-price policy for a newsvendor product supply chain with time and price sensitive demand

In this study, a dominant manufacturer wholesales a technological product to a retailer. In technology-related industries, the obsolescence of an existing product and/or the appearance of a new product decrease the attractiveness of the existing product. This study also assumes that the market demand is stochastic and price-sensitive, where this price-sensitivity increases by time. Hence, retailers need to decline the retail price during the product life cycle to alleviate the effect of time on the demand. Here, two models/cases are considered. In the first model, the retailer decreases the retail price at midlife without any compensation from the manufacturer. In the second model, the manufacturer gives rebate to the retailer when the retailer declines the retail price at midlife. In addition, the performance of the proposed models is numerically compared with wholesale-price-only and the buyback policies.