OPTIMAL PRICING USING A GAME THEORY APPROACH

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in supporting economic growth in developing countries, including Indonesia. However, MSMEs face various challenges, such as limited institutional capacity and human resources, slow technology adoption, and difficulties in marketing. This study focuses on the traditional food and beverage market in Mojokerto, where there is a significant profit gap between suppliers and retailers. This condition indicates inefficiencies and suboptimal profit distribution, highlighting the need for a pricing mechanism that can account for strategic changes among market participants. This research combines Monte Carlo simulation and Game Theory approaches. Monte Carlo simulation is employed to accommodate demand uncertainty and to simulate future system conditions, while Game Theory is used to analyze and optimize the strategies of each player in order to achieve an equilibrium point. The results identify two game schemes: non-cooperative and cooperative games. In the non-cooperative game, the optimal strategy for both players is the high strategy, yielding total profits of IDR 103,972,500 for the supplier and IDR 77,735,250 for the retailer. In the cooperative game, the optimal strategy consists of a high strategy for the supplier and a low strategy for the retailer, resulting in a total accumulated profit of IDR 189,354,000.