Optimal Prices and Inventories Decisions on Returns Policy with Practical Examples Thorough a Stackelberg Game
This study explores a Stackelberg game that consists of a manufacturer who is a leader manufacturing newsvendor-type products, and two retailers who are two followers selling the products in a stochastic demand market that is divided into two various prices sub-markets allowing demand leakage from a high-priced market to a low-priced market. The objective of the game is that the manufacturer offers a returns policy contract in an effort that not only to maximize its expected profit by determining wholesale price and buy-back price, but also to improve the two retailers’ expected profits by determining their prices and order sizes. We develop a simple solution procedure to the case of uniformly distributed demand, and thereby conduct a string of examples incorporating with the factors of demand leakage rate, consumers’ price-sensitivity and demand variability. Many significant contributions of this study include: the chain should give up some sales opportunity in high price-sensitive markets and then offset back from low price-sensitive ones; the two retailers jointly bear the entire risk of demand uncertainty; and the returns policy contract indeed outperforms a price-only contract although it is not the Pareto improvement to low-priced market segment.
Volume (Year): 3 (2013)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://hrmars.com/index.php/pages/detail/Accounting-Finance-Journal|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zhang, Michael & Bell, Peter C., 2007. "The effect of market segmentation with demand leakage between market segments on a firm's price and inventory decisions," European Journal of Operational Research, Elsevier, vol. 182(2), pages 738-754, October.
- Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
- Yao, Z. & Leung, Stephen C.H. & Lai, K.K., 2008. "Analysis of the impact of price-sensitivity factors on the returns policy in coordinating supply chain," European Journal of Operational Research, Elsevier, vol. 187(1), pages 275-282, May.
- Bose, Indranil & Anand, Paul, 2007. "On returns policies with exogenous price," European Journal of Operational Research, Elsevier, vol. 178(3), pages 782-788, May.
- Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
- Zhang, Michael & Bell, Peter C. & Cai, Gangshu (George) & Chen, Xiangfeng, 2010. "Optimal fences and joint price and inventory decisions in distinct markets with demand leakage," European Journal of Operational Research, Elsevier, vol. 204(3), pages 589-596, August.
- Lau, Hon-Shiang & Lau, Amy Hing-Ling, 1999. "Manufacturer's pricing strategy and return policy for a single-period commodity," European Journal of Operational Research, Elsevier, vol. 116(2), pages 291-304, July.
When requesting a correction, please mention this item's handle: RePEc:hur:ijaraf:v:3:y:2013:i:2:p:66-77. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hassan Danial Aslam)
If references are entirely missing, you can add them using this form.