Dominance Relationship Among the Retailer’s Strategies Under the Semi-Stackelberg Newsvendor Situation with Quantity Discounts

2016 ◽  
Vol 33 (02) ◽  
pp. 1650014
Author(s):  
Youkyung Won
Keyword(s):  
Probability Distribution ◽  
Demand Function ◽  
Dominant Strategy ◽  
Optimal Order ◽  
Quantity Discounts ◽  
Order Quantity ◽  
Dominance Relationship ◽  
Optimal Order Quantity ◽  
Dependent Demand ◽  
Stackelberg Leader

In this paper, we investigate the retailer’s behavior under the supplier-driven semi-Stackelberg newsvendor situation in which (i) the supplier plays as a semi-Stackelberg leader with or without his discounts schedule being offered to the retailer, (ii) the retailer plays as a Stackelberg follower with or without her discounts schedule being offered to the end customer, and (iii) neither party has perfect information on the endogenous price-dependent demand function or exogenous probability distribution of demand. In this situation, the retailer’s concern is identifying the dominant strategy by which she can safely implement her own scheme for customer discounts regardless of the order quantity rather than finding the best strategy yielding the optimal order quantity that maximizes her expected profit. We show that a consistent dominance relationship exists among the retailer’s strategies when the newsvendor chooses to offer progressive multiple discounts to customers regardless of the supplier’s strategy of offering the retailer either all-units discounts or no-discounts.

scholarly journals Bartering: Price-Setting Newsvendor Problem with Barter Exchange

2021 ◽  
Vol 13 (12) ◽  
pp. 6684
Author(s):  
Milena Bieniek
Keyword(s):  
Demand Function ◽  
Social Economic ◽  
Optimal Solution ◽  
Newsvendor Problem ◽  
Optimal Order ◽  
Price Setting ◽  
Order Quantity ◽  
Economic Uncertainty ◽  
Optimal Price ◽  
Dependent Demand

Barter exchange is a system of swapping goods or services for other goods or services in a moneyless and direct manner. Barter has become an effective model of a circular economy because it reduces the consumption impact. Bartering maximizes the utility of assets and existing resources, and can unleash the unspent social, economic, and environmental value of underutilized assets. The present article analyzes the price-setting newsvendor problem with a barter exchange option. The retailer facing a stochastic price-dependent demand sells a product on the market and, additionally, needs another product for its own purposes. Therefore, first, the retailer trades the unsold product for the product it needs by means of barter, and next disposes of the unsold product at a discounted price at the end of the selling season. The retailer’s optimal order quantity and optimal price are derived assuming additive uncertainty in demand. This type of demand function has special characteristics, for example, the actual demand may attain negative values in times of economic uncertainty. The possibility of negative demand realizations is taken into consideration in the study. It proves that, in certain cases, the optimal solution belongs to the set of high barter prices which implies that the actual demand may be negative.

scholarly journals Coping with Loss Aversion in the Newsvendor Model

2015 ◽  
Vol 2015 ◽  
pp. 1-11 ◽  
Author(s):  
Jianwu Sun ◽  
Xinsheng Xu
Keyword(s):  
Expected Utility ◽  
Loss Aversion ◽  
Confidence Level ◽  
Profit Maximization ◽  
Optimal Order ◽  
Market Demand ◽  
Newsvendor Model ◽  
Order Quantity ◽  
Decision Bias ◽  
Optimal Order Quantity

We introduce loss aversion into the decision framework of the newsvendor model. By introducing the loss aversion coefficientλ, we propose a novel utility function for the loss-averse newsvendor. First, we obtain the optimal order quantity to maximize the expected utility for the loss-averse newsvendor who is risk-neutral. It is found that this optimal order quantity is smaller than the expected profit maximization order quantity in the classical newsvendor model, which may help to explain the decision bias in the classical newsvendor model. Then, to reduce the risk which originates from the fluctuation in the market demand, we achieve the optimal order quantity to maximize CVaR about utility for the loss-averse newsvendor who is risk-averse. We find that this optimal order quantity is smaller than the optimal order quantity to maximize the expected utility above and is decreasing in the confidence levelα. Further, it is proved that the expected utility under this optimal order quantity is decreasing in the confidence levelα, which verifies that low risk implies low return. Finally, a numerical example is given to illustrate the obtained results and some management insights are suggested for the loss-averse newsvendor model.

scholarly journals Coordination of Supply Chain with One Supplier and Two Competing Risk-Averse Retailers under an Option Contract

2016 ◽  
Vol 2016 ◽  
pp. 1-11 ◽  
Author(s):  
Rui Wang ◽  
Shiji Song ◽  
Cheng Wu
Keyword(s):  
Supply Chain ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Pareto Optimum ◽  
Risk Averse ◽  
Order Quantity ◽  
Supply Chain System ◽  
Chain System ◽  
Option Contract ◽  
Optimal Order Quantity

This paper studies an option contract for coordinating a supply chain comprising one risk-neutral supplier and two risk-averse retailers engaged in promotion competition in the selling season. For a given option contract, in decentralized case, each risk-averse retailer decides the optimal order quantity and the promotion policy by maximizing the conditional value-at-risk of profit. Based on the retailers’ decision, the supplier derives the optimal production policy by maximizing expected profit. In centralized case, the optimal decision of the supply chain system is obtained. Based on the decentralized and centralized decision, we find the coordination conditions of the supply chain system, which can optimize the supply chain system profit and make the profits of the supply chain members achieve Pareto optimum. As for the subchain, we also find the coordination conditions, which generalize the results of the supply chain with one supplier and one retailer. Our analysis and numerical experiments show that there exists a unique Nash equilibrium between two retailers, and the optimal order quantity of each retailer increases (decreases) with its own (competitor’s) promotion level.

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 Hedging Risks in the Loss-Averse Newsvendor Problem with Backlogging

Mathematics ◽  
2019 ◽  
Vol 7 (5) ◽  
pp. 429 ◽  
Author(s):  
Xiaoqing Liu ◽  
Felix T. S. Chan ◽  
Xinsheng Xu
Keyword(s):  
Value At Risk ◽  
Profit Maximization ◽  
Newsvendor Problem ◽  
Sensitivity Analyses ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Newsvendor Model ◽  
Order Quantity ◽  
Decision Bias ◽  
Optimal Order Quantity

This paper studies the optimal order decisions for the loss-averse newsvendor problem with backordering and contributes to the risk hedging issue in the newsvendor model. The Conditional Value-at-Risk (CVaR) measure is applied to quantify the potential risks for the loss-averse newsvendor in a backordering setting, and we obtain the optimal order quantity for a loss-averse newsvendor to maximize the CVaR of utility. It is found that the optimal order quantity to maximize the CVaR objective could be bigger or smaller than the expected profit maximization (EPM) order quantity, which provides an alternative explanation on decision bias in the newsvendor model. This study also reveals that the optimal order quantity for a loss-averse newsvendor to maximize expected utility with backordering is smaller than the EPM order quantity, which implies that backordering encourages the loss-averse newsvendor to order fewer items. Sensitivity analyses are performed to investigate the properties of the optimal order quantities and managerial insights are suggested. This paper provides a novel method for the risk management of the loss-averse newsvendor model and presents several new ordering policies for the retailers in practice.

scholarly journals Economic Order Quantity Model for Perishable Items Having Exponentially Increasing Demand

2019 ◽  
Vol 9 (1) ◽  
pp. 462
Author(s):  
Sarbjit Singh ◽  
Sayan Banerjee
Keyword(s):  
Fast Moving ◽  
Economic Order Quantity ◽  
Optimal Order ◽  
Order Quantity ◽  
Perishable Items ◽  
Perishable Goods ◽  
Constant Rate ◽  
Rapid Pace ◽  
Optimal Order Quantity ◽  
Increasing Demand

This study considers perishable items whose deterioration starts immediately after procurement with constant rate of deterioration, ξ. The goods considered in the paper are fast moving goods whose demand is increasing at a very rapid pace. Therefore, the demand has been considered as exponentially increasing demand. This study provides the buyer with a policy that aids them to decide their optimal order quantity considering the goods are perishable goods with exponentially increasing demand.

An Optimal Inventory Policy for Items Having Constant Demand and Constant Deterioration Rate with Trade Credit

2012 ◽  
Vol 5 (2) ◽  
pp. 89-95 ◽  
Author(s):  
R. P. Tripathi ◽  
S. S. Misra
Keyword(s):  
Trade Credit ◽  
Optimal Order ◽  
Order Quantity ◽  
Inventory Models ◽  
Inventory Policy ◽  
Deterioration Rate ◽  
Optimal Order Quantity ◽  
Optimal Ordering ◽  
Constant Deterioration ◽  
Ordering Quantity

In most of the classical inventory models the demand is considered as constant. In this paper the model has been framed to study the items whose demand and deterioration both are constant. The authors developed a model to determine an optimal order quantity by using calculus technique of maxima and minima. Thus, it helps a retailer to decide its optimal ordering quantity under the constraints of constant deterioration rate and constant pattern of demand.

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