In the ever-evolving world of retail, understanding retailers’ strategic pricing decisions is crucial for success. This study examines the strategic pricing decisions of both a traditional retailer and an online retailer within a supply chain with a single manufacturer, considering customers’ heterogeneous tastes and strategic behavior. We present a game-theory model to analyze pricing strategies across four scenarios, where the manufacturer employs pre-announced pricing: pre-announced pricing for both retailers (PP), dynamic pricing for both retailers (DD), dynamic pricing for the traditional retailer, pre-announced pricing for the online retailer (DP), and preannounced pricing for the traditional retailer and dynamic pricing for the online retailer (PD). The findings suggest that online and traditional retailers should opt for pre-announced pricing simultaneously, or the traditional retailer should choose pre-announced pricing while the online retailer chooses dynamic pricing to maximize their profit in the presence of strategic customers. The study also provides insights into the impact of strategic customer behavior and the acceptance rate for online purchases on optimal pricing decisions. Academically, this research significantly contributes to the literature on pricing strategies in supply chain management by incorporating the critical impact of strategic customer behavior.
