Supply chain pricing and coordination with markdown strategy in the presence of conspicuous consumers

This paper studies the problem of supply chain pricing and coordination with markdown policy in the presence of conspicuous consumption. A two‐period pricing model is proposed to investigate the effect of conspicuous consumption on pricing decisions with markdown pricing policy for a supply chain that consists of a manufacturer and retailer. The optimal pricing strategies for the integrated supply chain and decentralized supply chain are derived respectively. Our results show that an anticipated conspicuous consumption can benefit the supply chain even though the conspicuous consumption aggravates the double marginalization effect. The conspicuous consumption can serve as a level to segment the market and can promote the supply chain revenue. In addition, our results indicate that the supply chain can benefit from rationing. We also introduce a revenue‐sharing contract and prove that it can be applied to coordinate the supply chain with conspicuous consumption. An interval of the revenue‐sharing rate for coordinating with the supply chain can be coordinated without any additional transfer payment being provided.