scholarly journals Optimal Pricing and order quantity strategies for a firm offering multiple products facing customers cannibalization and random market demand

2010 ◽  
Vol 15 (2) ◽  
pp. 69-82
Author(s):  
Hamoudeh S. Al-Zaini ◽  
Syed A. Raza
Keyword(s):  
Optimal Pricing ◽  
Market Demand ◽  
Order Quantity ◽  
Multiple Products

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 Contracts Adjustment under Bilateral Information Updating in a Supply Chain

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-15
Author(s):  
Xinhui Wang ◽  
Yingsheng Su ◽  
Zihan Zhou ◽  
Yiling Fang
Keyword(s):  
Supply Chain ◽  
Production Cost ◽  
Wholesale Price ◽  
Transfer Payment ◽  
Market Demand ◽  
Order Quantity ◽  
Minimum Order ◽  
Information Updating ◽  
Minimum Order Quantity ◽  
Market Outlook

This paper investigates contracts adjustment between one manufacturer and one retailer under bilateral information updating. The manufacturer incurs uncertain production cost and the retailer faces uncertain demand, but they can acquire independent signals to update production cost and demand, respectively. They commit an initial agreement on an initial wholesale price, minimum order quantity, and information sharing as well as the transfer payment and decisions adjustment when information is updated. We find that due to the joint impact of production cost variation and market variation, the manufacturer may not decrease (increase) her wholesale price when the updated production cost is lower (higher) than expected. The retailer places an additional order even if the wholesale price rises when the market outlook is good, but places an order with the minimum order quantity even if the wholesale price falls when the market outlook is bad. Secondly, for a certain level of information accuracy of the production cost and market demand, the retailer is always better off with information updating, but the manufacturer may be worse off with information updating when facing a bad market outlook. Thirdly, when information accuracy of the production cost and market demand varies, the manufacturer only benefits from a high accuracy of production cost. Profits of the retailer and the supply chain are increasing (decreasing) with accuracy of production cost if the updated production cost is larger (smaller) than expected.

Two-Period Pricing with Selling Effort in the Presence of Strategic Customers

2019 ◽  
Vol 36 (03) ◽  
pp. 1950011 ◽  
Author(s):  
Feng Yang ◽  
Junjun Kong ◽  
Minyue Jin
Keyword(s):  
Future Price ◽  
Optimal Pricing ◽  
Enhancement Effect ◽  
Direct Impact ◽  
Market Demand ◽  
Strategic Customers ◽  
Pricing Decisions ◽  
Price Discounts ◽  
Selling Effort ◽  
Second Period

This paper investigates the implications of selling effort upon a monopolistic seller’s optimal pricing decisions and its performance in the presence of strategic customers. In our model, strategic customers can anticipate future price discounts and decide on when to purchase products from the seller over two periods. The direct impact of selling effort is to induce more customers to purchase in the first period. Two pricing policies are under consideration: (i) preannounced pricing under which the seller commits to a price path over two periods in advance; (ii) contingent pricing under which the seller can dynamically set a price in each period. The analytical results demonstrate that preannounced pricing always dominates contingent pricing from the seller’s perspective. Moreover, compared with the results under contingent pricing, selling effort is enhanced but market demand is shrunk under preannounced pricing. Through sensitivity analysis, we further find that when customers become more willing to postpone their purchases to the second period, the seller should reduce its selling effort in the first period if the demand-enhancement effect of selling effort is sufficiently low.

scholarly journals Optimal Pricing in Recycling and Remanufacturing in Uncertain Environments

2020 ◽  
Vol 12 (8) ◽  
pp. 3199
Author(s):  
Guangzhou Yan ◽  
Yaodong Ni ◽  
Xiangfeng Yang
Keyword(s):  
Historical Data ◽  
Programming Model ◽  
Optimal Pricing ◽  
Market Demand ◽  
Pricing Model ◽  
Uncertain Environments ◽  
Uncertainty Distribution ◽  
Equivalent Models ◽  
Fashion Products ◽  
Proposed Model

With the increasing awareness of environmental protection, firms pay much more attention to the recycling and remanufacturing of used products. This paper addresses the problem of the optimal pricing in recycling and remanufacturing in uncertain environments. We consider two strategies of remanufacturing products, by which a recycled product can be repaired and sold as a second-hand product or dissembled into materials for production of new products according to its quality. As the market demand for products and the quantities of recycled products, such as fashion products and mobile phones, usually lack historical data, this paper adopts uncertainty theory to depict uncertainty in establishing the pricing model. An uncertain programming model and a series of crisp equivalent models are proposed under the assumptions of particular uncertainty distribution. Finally, numerical experiments are performed to show how various parameters influence the results of the proposed model.

scholarly journals Joint Optimal Pricing and Ordering Decisions for Seasonal Products with Weather-Sensitive Demand

2014 ◽  
Vol 2014 ◽  
pp. 1-8 ◽  
Author(s):  
Hongyong Fu ◽  
Bin Dan ◽  
Xiangkai Sun
Keyword(s):  
Optimal Solution ◽  
Weather Conditions ◽  
Economic Behavior ◽  
Expected Profit ◽  
Optimal Pricing ◽  
Seasonal Temperature ◽  
Market Demand ◽  
Weather Uncertainty ◽  
The One ◽  
Seasonal Products

Retailers selling seasonal products often face the challenge in matching their inventory levels with uncertain market demand which is sensitive to weather conditions, such as the average seasonal temperature. Therefore, how to make the joint ordering and pricing decisions may help retailers to increase their profits. In this paper, we address the joint determination of pricing and ordering decisions in a newsvendor setting, where a retailer (newsvendor) sells the seasonal products and faces demand risk due to weather uncertainty. We show that the maximum expected profit function is continuous and concave, so the optimal solution to the retail price and order quantity exists and it is the one and only solution. In addition, we numerically investigate the impacts of related parameters on the retailer’s expected profit and the optimal pricing and ordering decisions and illustrate some useful management insights into the economic behavior of firms.

Cost-Sharing Contract in Low Carbonization Supply Chain Based on Improving Demand for Low-Carbon Products

2014 ◽  
Vol 1073-1076 ◽  
pp. 2539-2544
Author(s):  
Yan Ju Zhou ◽  
Yu Qing Huang
Keyword(s):  
Supply Chain ◽  
Cost Sharing ◽  
Emission Reduction ◽  
Carbon Emission ◽  
Retail Price ◽  
Market Demand ◽  
Low Carbon ◽  
Order Quantity ◽  
Carbon Emission Reduction ◽  
Reduction Cost

For the existence of carbon emission reduction cost, the retail price of the products is so high that the market demand is low, which restricts the promotion of low-carbon products. On the background of a bilateral-monopoly supply chain consisting of a single manufacturer and a single retailer, we establish Stackelberg models based on the carbon emission reduction cost-sharing. And we analyze the changes of the order quantity, the profits of each member and the whole supply chain before and after the implementation of the carbon emission reduction cost-sharing contract. According to the research, when the carbon emission reduction cost-sharing contract is introduced into the model, it leads to a good consequence that the optimal order quantity of the low-carbon product increases, the retail price decreases, and the manufacturer and the retailer will get Pareto improvement on certain condition. Then we derivate the necessary conditions that the profit of the retailer and the manufacturer could both increase.

scholarly journals Optimal Pricing Decision of Fashion Apparel considering Experiential Service and Design Enhancement

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-11 ◽  
Author(s):  
Qi Xu ◽  
Lili Zhou ◽  
Qi Chen
Keyword(s):  
Substitution Effects ◽  
Optimal Pricing ◽  
Selling Price ◽  
Market Demand ◽  
Complementarity Effect ◽  
Deterioration Rate ◽  
Pricing Decision ◽  
Proposed Model ◽  
Total Profit ◽  
Fashion Apparel

Fashionable clothing is susceptible to seasonality, fashion popularity, and other factors. The decline in the fashion level for fashion apparel will cause its market value to continuously decrease, reducing market demand and creating a backlog of apparel inventory. Under such a circumstance, the apparel retailer chooses to maintain the fashion of the goods by providing experiential services or enhancing product design capabilities. This paper focuses on the discussions on the issue of whether experience service and design efforts are complements or substitutes. The major objective is to simultaneously determine the experience service investment and the optimal selling price to maximize the total profit. First, a Cobb–Douglas utility function is used to derive a demand function that depends on the price and fashion level. Four kinds of inventory models are further established to obtain optimal pricing and inventory ordering strategies. Second, an algorithm is presented to search for the optimal solutions of the proposed model. Finally, a numerical example is provided to perform a sensitivity analysis of the key parameters and to discuss specific managerial insights. The numerical examples show that both the experiential services and the enhanced fashion design can effectively reduce the apparel company’s inventory and increase profits. When the two strategies are combined, they will produce complementary or substitution effects, which depend on the deterioration rate of the fashion level of the apparel. If the deterioration rate is less than a critical value, the interaction of experiential services and design investment has a complementarity effect.

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