Pricing Strategy of Retailer-Sponsored Gift Card in Supply Chain

Due to fierce market competition, businesses take a variety ways of promotions. Among them, gift card is widely used in major businesses. In this paper, we studied the pricing strategy of retailer-sponsored gift card. We develop a model depending on the wholesale price is fixed and the gift card redemption is increasing in gift card value. We explore the optimal retail price and the optimal gift card value and get the profits of retailer, manufacturer and the supply chains. Finally, we do a comparative static analysis to explore the implications of taking gift card to manufacturer, retailer and consumers.