Advertising and Pricing Policies in a Two-Echelon Supply Chain with a Capital-Constrained Retailer

2019 ◽  
Vol 53 (4) ◽  
pp. 1331-1342
Author(s):  
Honglin Yang ◽  
Lingling Chu ◽  
Hong Wan
Keyword(s):  
Supply Chain ◽  
Interest Rate ◽  
Trade Credit ◽  
Wholesale Price ◽  
Retail Price ◽  
Stackelberg Equilibrium ◽  
Initial Capital ◽  
Pricing Policies ◽  
The Interest Rate ◽  
Theoretical Results

We consider a two-echelon supply chain consisting of one supplier and one capital-constrained retailer. The supplier can offer the retailer trade credit to fund his orders. To boost sales, the retailer invests part or all of initial capital exclusively in advertising at the beginning of the sales season. Demand is sensitive to both retail price and advertising expenses of the retailer. With a wholesale price contract, we analytically derive the Stackelberg equilibrium with respect to pricing by both parties and advertising by the retailer. Our results show that the retailer with less initial capital prefers to invest full initial capital in advertising irrespective of the advertising elasticity or the interest rate charged by the supplier. The retailer with more initial capital only invests part of initial capital in advertising. The retailer’s advertising policy under different initial capital levels always benefits the supply chain and the supplier. We further identify the effects of the advertising elasticity and the interest rate on the pricing policies. Numerical simulations and sensitivity analysis are given to elaborate our theoretical results.

scholarly journals Impact of Loss-Aversion on a Financially-Constrained Supply Chain

2019 ◽  
Vol 11 (9) ◽  
pp. 2680
Author(s):  
Jinpyo Lee
Keyword(s):  
Supply Chain ◽  
Interest Rate ◽  
Loss Aversion ◽  
Wholesale Price ◽  
Decision Makers ◽  
Optimal Decision ◽  
Optimal Order ◽  
Order Quantity ◽  
Credit Guarantee ◽  
The Interest Rate

Traditionally, in the area of production and operations management, the financial states and decision-makers’ behaviour regarding loss have been ignored in the supply chain, which may lead to infeasible or unrealistic practices or even catastrophic losses in practical supply chain operations. Therefore, this study aims to provide a model for operational efficiency in a financially constrained supply-chain system consisting of a financially deficient retailer, a supplier, and a bank, and to analyse the impact of the behaviour of the bank and the supplier on the operational decision. It is assumed that the bank provides a loan to the retailer considering the supplier’s credit guarantee for the retailer. The supplier’s credit guarantee implies that, if the retailer goes bankrupt after the sales season, then a pre-guaranteed proportion of the retailer’s loan is repaid by the supplier. Moreover, to capture the decision-makers’ behaviour regarding loss, it is assumed that the supplier and the bank are loss-averse in their risk preference on the final profit. Under this circumstance, it is intended to draw the theoretical implications by analysing a loss-averse behaviour model for a supplier and a bank, in which a kinked piecewise linear and concave utility function is considered. The optimal decision is analytically derived for the retailer (the optimal order quantity), the supplier (the optimal wholesale price), and the bank (the optimal interest rate). In addition, a sensitivity analysis is conducted to investigate how the model parameters affect the optimal decision for the retailer, the supplier, and the bank under different degrees of loss-aversion. The optimal decisions are shown to be highly affected by the degree of the loss-aversion coefficient of the bank and the supplier and to be more conservative than the result in the traditional case which optimises the risk-neutral expected profit (the unit degree of loss-aversion). The analytical results can be summarised as follows. First, as the wholesale price and the interest rate increase, the optimal order quantity decreases. Second, the more loss-averse the supplier is, the higher the optimal wholesale price that is offered to the retailer by the supplier. Third, the larger the credit guarantee that is provided to the retailer by the supplier, the higher the optimal wholesale price that is provided to the retailer. Fourth, the more loss-averse the bank is, the higher the interest rate that is offered to the retailer; and the larger the credit guarantee that is provided by the supplier, the lower the interest rate that is offered to the retailer.

scholarly journals Joint financing and ordering decisions in a capital-constrained supply chain with risk preference

2020 ◽  
Author(s):  
Zhiyuan Zhen ◽  
Jing Ru Wang
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Risk Preference ◽  
Bank Credit ◽  
Risk Averse ◽  
Initial Capital ◽  
Preference Behavior ◽  
Credit Financing

We consider a two-echelon supply chain consisting of one dominant supplier and one capital-constrained retailer. The retailer needs to solve the shortage of working capital either from a bank or from its core supplier, which offers trade credit when it is also beneficial to itself. We assume the retailer is risk-averse behavior and the supplier has different risk preference behaviors that jointly model risk-averse, risk-neutral, and risk-taking. With a wholesale price contract, we incorporate each member’s risk preference behavior into its objective function. Then we derive the optimal decisions in a Stackelberg game under bank credit financing and trade credit financing, respectively. We find that there exists a supplier’s risk preference threshold that distinguishes financing scheme. When the supplier is a relatively higher risk preference, trade credit financing makes both the retailer and the supplier better off and is a unique financing equilibrium. Otherwise, the members prefer bank credit financing . Besides, the supplier with relatively higher risk preference behavior prefers the retailer with a low initial capital as a partner; the supplier with relatively lower risk preference behavior prefers the retailer with a higher initial capital level. The above theoretical results are verified by numerical analysis.

scholarly journals Trade Credit with Barter in a Capital-Constrained Supply Chain

2021 ◽  
Vol 13 (20) ◽  
pp. 11361
Author(s):  
Yangyang Huang ◽  
Zhenyang Pi ◽  
Weiguo Fang
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Wholesale Price ◽  
Uncertain Demand ◽  
Equilibrium Strategy ◽  
Optimal Order ◽  
Order Quantity ◽  
Supply Rate ◽  
Optimal Order Quantity ◽  
And Performance

Barter has emerged to alleviate capital pressure, maximize the circulation of goods, and facilitate the disposal of excess inventory. This study considers a two-level supply chain consisting of a manufacturer and a capital-constrained retailer with trade credit, in which the retailer exchanges unsold products for needed subsidiary products on a barter platform. The retailer’s optimal order quantity and the manufacturer’s wholesale price are derived, and the influences of barter and other factors on the equilibrium strategy and performance of the supply chain are examined; these results are verified and supplemented by numerical simulation. We find that the retailer can increase profit by bartering when facing highly uncertain demand, that the retailer’s optimal order quantity increases with the supply rate and demand for subsidiary products, and that both manufacturer and retailer benefit from the high supply rate of subsidiary products. However, barter induces the manufacturer to raise the wholesale price to prevent its profit from being harmed. In addition, the manufacturer suffers from the retailer’s initial capital.

scholarly journals Emergency Coordination Model of Fresh Agricultural Products’ Three-Level Supply Chain with Asymmetric Information

2016 ◽  
Vol 2016 ◽  
pp. 1-9 ◽  
Author(s):  
Juan Yang ◽  
Haorui Liu ◽  
Xuedou Yu ◽  
Fenghua Xiao
Keyword(s):  
Supply Chain ◽  
Asymmetric Information ◽  
Supply Chain Coordination ◽  
Wholesale Price ◽  
Nonlinear Function ◽  
Retail Price ◽  
Agricultural Products ◽  
Agricultural Product ◽  
Coordination Model ◽  
Emergency Events

In consideration of influence of loss, freshness, and secret retailer cost of products, how to handle emergency events during three-level supply chain is researched when market need is presumed to be a nonlinear function with retail price in fresh agricultural product market. Centralized and decentralized supply chain coordination models are studied based on asymmetric information. Optimal strategy of supply chain in dealing with retail price perturbation is caused by emergency events. The research reveals robustness for optimal production planning, wholesale price for distributors, wholesale price for retailers, and retail price of three-level supply chain about fresh agricultural products. The above four factors can keep constant within a certain perturbation of expectation costs for retailers because of emergency events; the conclusions are verified by numerical simulation. This paper also can be used for reference to the other related studies in how to coordinate the supply chain under asymmetric and punctual researches information response to disruptions.

Optimal decisions and coordination strategy of a capital-constrained supply chain under customer return and supplier subsidy

2018 ◽  
Vol 13 (2) ◽  
pp. 278-301 ◽  
Author(s):  
Gongbing Bi ◽  
Ping Chen ◽  
Yalei Fei
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Modeling Framework ◽  
Content Type ◽  
Initial Capital ◽  
Joint Operations ◽  
Fixed Proportion ◽  
Customer Returns ◽  
Credit Financing

Purpose The purpose of the paper is to explore impacts of financing and supplier subsidy on capital-constrained retailer and the value of returns subsidy contract under a situation where the retailer makes joint operations and finance decisions. Design/methodology/approach This paper considers a two-level supply chain, including a retailer and a supplier. Facing problems of capital constraints and even customer returns, the newsvendor-like retailer orders from a well-capitalized supplier. The supplier allows the retailer a delay in payment and provides a subsidy contract to alleviate its problems if it is profitable. Considering their difference of initial capital status, the retailer is assumed to be Follower of Stackelberg Game and the supplier is the Leader. Findings The supplier return subsidy contract has some merits for both of partners in the chain. And it does not coordinate the supply chain when the retailer has enough initial capital; however, when the retailer is capital constrained, it does. In addition, the retailer’s initial capital level significantly affects the supplier’s subsidy decision. Research limitations/implications Return rate is simplified to a fixed proportion of completed demand. In addition, trade credit is only financing source in this paper, and other types of financing methods, such as bank credit, can be taken too. Originality/value This paper first incorporates trade credit financing and customer returns into a modeling framework to investigate the capital-constrained retailer’s joint operations and finance decisions and the value of supplier’s subsidy contract.

scholarly journals Competitive Analysis for Online Leasing Problem with Compound Interest Rate

2011 ◽  
Vol 2011 ◽  
pp. 1-12 ◽  
Author(s):  
Xingyu Yang ◽  
Weiguo Zhang ◽  
Weijun Xu ◽  
Yong Zhang
Keyword(s):  
Interest Rate ◽  
Competitive Analysis ◽  
The Other ◽  
Continuous Version ◽  
Numerical Examples ◽  
The Interest Rate ◽  
The One ◽  
Compound Interest ◽  
Theoretical Results ◽  
Deterministic Strategy

We introduce the compound interest rate into the continuous version of the online leasing problem and discuss the generalized model by competitive analysis. On the one hand, the optimal deterministic strategy and its competitive ratio are obtained; on the other hand, a nearly optimal randomized strategy is constructed and a lower bound for the randomized competitive ratios is proved by Yao's principle. With the help of numerical examples, the theoretical results show that the interest rate puts off the purchase date and diminishes the uncertainty involved in the decision making.

scholarly journals Research on the Dynamics Game Model in a Green Supply Chain: Government Subsidy Strategies under the Retailer’s Selling Effort Level

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-15 ◽  
Author(s):  
Xigang Yuan ◽  
Xiaoqing Zhang ◽  
Dalin Zhang
Keyword(s):  
Supply Chain ◽  
Wholesale Price ◽  
Dynamic Game ◽  
Retail Price ◽  
Green Supply Chain ◽  
Government Subsidy ◽  
Principal Agent Theory ◽  
Effort Level ◽  
The Impact ◽  
Selling Effort

Based on dynamic game theory and the principal-agent theory, this paper examined different government subsidy strategies in green supply chain management. Assuming that the retailer’s level of selling effort involved asymmetric information, this study analyzed the impact of different government subsidy strategies on the wholesale price, the product greenness level, retail price, the level of selling effort, the manufacturer’s profit, and the retailer’s profit. The results showed that (1) the government’s subsidy strategy can effectively not only improve the product greenness level but also increase the profits of an enterprise in a green supply chain, which helps the retailer to enhance their selling effort; (2) regardless of whether the retailer’s level of selling effort was high or low, as the government’s subsidy coefficient increased, the wholesale price continued to decrease, and the product greenness level and retailer’s selling effort level also increased.

scholarly journals Service and Price Decisions of a Supply Chain with Optional After-Sale Service

2016 ◽  
Vol 2016 ◽  
pp. 1-11
Author(s):  
Xiaochen Sun ◽  
Qingshuai Zhang ◽  
Yancong Zhou
Keyword(s):  
Quality Assurance ◽  
Supply Chain ◽  
Wholesale Price ◽  
Service Level ◽  
Retail Price ◽  
High Quality ◽  
Optional Service ◽  
Durable Products ◽  
Purchase Behaviors

For durable products, the high quality after-sales service has been playing an increasingly important role in consumers’ purchase behaviors. We mainly study a supply chain composed of a manufacturer and a retailer. In a process of products sales, the manufacturer will provide a basic free quality assurance service. On this basis, the retailer provides paid optional quality assurance service to consumers to promote sales. Users are divided into two categories in this paper: users with no optional service and users with optional services. We derive the equilibrium decisions between the manufacturer and the retailer under the following two cases: (i) the optional after-sales service level and the wholesale price determined by the manufacturer and the retail price determined by the retailer; (ii) the wholesale price determined by the manufacturer and the optional after-sales service level and the retail price determined by the retailer.

Decision Models of Supply Chain Under Asymmetric Information with Demand Disruption

2010 ◽  
Vol 143-144 ◽  
pp. 773-781
Author(s):  
Xin Rong Jiang ◽  
Yong Chao Li
Keyword(s):  
Supply Chain ◽  
Asymmetric Information ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Retail Price ◽  
Expected Profit ◽  
Decision Models ◽  
Market Demand ◽  
Optimal Production ◽  
Production Quantity

This paper studied the influence of asymmetric information and demand disruption on the decision of the supply chain. We analyzed the supply chain decision models based on a Stackelberg game under normal circumstances and demand disruption situation. The conclusion indicates when the market demand is disrupted, the optimal wholesale price, the retail price, the supplier’s expected profit and the supply chain system’s expected profit change in the same direction as the demand disruption, while the optimal production quantity and the retailer’s profit both have certain robustness under disruption. Finally we gave a numerical example to illustrate our analysis.

scholarly journals Strategic Conditions for Opening an Internet Store and Pricing Policies in a Retailer-Dominant Supply Chain

2015 ◽  
Vol 2015 ◽  
pp. 1-15 ◽  
Author(s):  
Yonghong Cheng ◽  
Zhongkai Xiong
Keyword(s):  
Supply Chain ◽  
Bargaining Power ◽  
The Internet ◽  
Optimal Price ◽  
Numerical Examples ◽  
Pricing Policies ◽  
Equilibrium Prices ◽  
Multichannel Retailing ◽  
Dominant Retailer ◽  
Theoretical Results

To examine when the manufacturer and dominant retailer open their own Internet stores and how setting prices to ensure opening Internet stores are profitable. We consider a two-echelon supply chain with one manufacturer and one dominant retailer. The retailer has a physical store in a monopolist market. Depending on whether the Internet stores are opened successfully by them, we firstly obtain equilibrium prices and profits under four possible supply chain structures. Secondly, we identify several strategic conditions when it is optimal to open an Internet store for the manufacturer and dominant retailer and discuss its implications. It is interesting to note that multichannel retailing is not necessarily the best strategy for the dominant retailer. In addition, we investigate the impacts of problem parameters (the dominant retailer’s bargaining power and consumers’ disutility of purchasing a product from Internet store) on the manufacturer and dominant retailer’s pricing policies. We find that the manufacturer’s optimal price at her Internet store is not always being lower than the dominant retailer’s. Finally, we conduct numerical examples to illustrate the theoretical results.

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