Dynamic Slotting and Pricing Decisions in a Durable Product Supply Chain
Journal of Optimization Theory & Applications, Vol. 137, No. 2, pp. 363-379, 2008
40 Pages Posted: 30 Jan 2008 Last revised: 16 Feb 2009
Abstract
We consider a supply chain in which a manufacturer sells an innovative durable product to an independent retailer over its life cycle. We assume that the product demand follows a Bass-type diffusion process, and it is determined by the market influences, retail price of the product, and shelf space allocated to it. We consider the following retailer profit optimization strategies: (i) the myopic strategy of maximizing the current-period profit and(ii) the far-sighted strategy of maximizing the life-cycle profit. We characterize the optimal dynamic shelf-space allocation and retail pricing policies for the retailer and wholesale pricing policies for the manufacturer. We also compute these policies. Surprisingly, we find that the manufacturer, and sometimes even the retailer, is better of with a myopic retailer strategy in some cases.
Keywords: Stackelberg differential games, the Bass model, pricing, slotting, supply chain management, open-loop policies, durable products
JEL Classification: C61, M31, M37, M31,M00, C71, C73
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Survey of Stackelberg Differential Game Models in Supply and Marketing Channels
By Xiuli He, Ashutosh Prasad, ...
-
By Xiuli He, Ashutosh Prasad, ...
-
Life-Cycle Channel Coordination Issues in Launching an Innovative Durable Product
By Genaro Gutierrez and Xiuli He