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Demand-supply dynamics in FMCG business: exploration of customers’ herd behavior. (English) Zbl 1431.91135

Summary: Nowadays, social interactions among customers play an increasingly important role in product demand. However, the existing literature mostly focusses on the social influence of other customers’ stated preference while disregarding the social influence of revealed preference. To bridge the gap, this paper incorporates the latter, referred to as herd behavior of customers, into a dynamic demand-supply system of fast moving consumer goods, whose sales to some extent depend on social interaction. Equilibrium points and their local stability are analyzed first. Then, we solve the optimal supply strategy and analyze the evolution characteristics of this demand-supply dynamics. Results indicate that there may be more than one equilibrium point in this system. Provider has two optimal supply policies if initial point is the indifference point, which separates state space if two steady states exist. In addition, the demand-supply evolution is periodic as the provider alternates between cultivating and exploiting the herd effect.

MSC:

91B10 Group preferences
91B52 Special types of economic equilibria

Software:

DMC
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References:

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