Research On Capacity Sharing Pricing Model And Strategy Selection Of Competing Manufacturers

Capacity sharing in the manufacturing industry is increasingly valued by manufacturing companies as it can effectively facilitate the matching of capacity supply and demand,improve the utilization of high-quality capacity,and reduce manufacturers’ production costs.In order to achieve stable capacity sharing cooperation,an appropriate pricing strategy for capacity sharing is critical,particularly if capacity sharing occurs between competing manufacturers.This thesis investigates the optimal capacity sharing pricing strategy between two competing manufacturers producing partially substitutable products in the same market,taking into consideration of external market,internal operational,and relationshipspecific factors.The effects of different capacity-sharing pricing strategies on manufacturers’ optimal decisions,profits,and social welfare are evaluated by comparing manufacturers’ equilibrium results under three models of competition,fixed-fee capacity sharing,and mixed-fee capacity sharing,respectively.The findings suggest that both capacity sharing pricing strategies can reduce retail prices and thus benefit consumers.Manufacturers’ willingness to participate in capacity sharing depends on the trade-off between increased profits from capacity sharing and losses from increased competition,where the choice of the fixed-fee capacity sharing pricing strategy is influenced by product substitution and the difference between the two manufacturers’ production costs,while the choice of the mixed-fee capacity sharing pricing strategy is influenced by the manufacturers’ bargaining power and the difference between the two manufacturers’ production costs.This thesis also finds that both capacity sharing pricing strategies can improve social welfare.In addition,this thesis explores the optimal pricing strategy choice problem when manufacturers are faced with three alternative strategies,including competition,fixed-fee capacity sharing,and mixed-fee capacity sharing,and finds that manufacturers will always choose the capacity sharing strategy when product substitution is lower,while the competition strategy is likely to occur when product substitution is higher.Furthermore,this thesis extends the model to the case of market asymmetry and finds that increasing differences in manufacturers’ maximum retail prices make manufacturers more likely to choose the competition strategy.Finally,this thesis extends the model to the case of capacity constraint and finds that capacity constraint interacts with factors such as production cost differences to influence firms’ capacity sharing decisions.This thesis incorporates product substitution rate,information symmetry(or asymmetry),and interfirm power relationship to evaluate the trade-off between capacity sharing associated benefits and costs.The relevant findings in this thesis can help companies make more informed strategic and operational decisions based on their size and characteristics.