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Profit maximization in a multi-product firm with impatient customers

Author

Listed:
  • E J Levin

    (University of Stirling)

  • Y Ma

    (Lingnan University, Tuen Mun)

  • R E Wright

    (University of Stirling
    Centre for Economic Policy Research (CEPR)
    University of Bonn)

Abstract

In this paper, the standard model of profit maximization is extended to include multi-product production in a market characterized by impatient customers. A formal model is presented that includes price, delivery frequency, production run length per set-up and product range as endogenous variables. The model facilitates the analysis of the complex interactions between these variables and highlights the inherent problems relating to profit maximization. For example, offering a broader range of products and/or more rapid delivery may seem to be a sensible response for a multi-product firm with impatient customers in a scenario of depressed demand. However, the analysis shows that such strategies could be counterproductive.

Suggested Citation

  • E J Levin & Y Ma & R E Wright, 2004. "Profit maximization in a multi-product firm with impatient customers," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(3), pages 211-218, March.
    • Handle: RePEc:pal:jorsoc:v:55:y:2004:i:3:d:10.1057_palgrave.jors.2601674
    DOI: 10.1057/palgrave.jors.2601674
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    References listed on IDEAS

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    Cited by:

    1. Skrynkovskyy, Ruslan & Pavlenchyk, Nataliia & Tsyuh, Svyatoslav & Zanevskyy, Ihor & Pavlenchyk, Anatoliі, 2022. "Economic-mathematical model of enterprise profit maximization in the system of sustainable development values," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 8(4), December.
    2. P C Bell & J Chen, 2006. "Cutting costs or enhancing revenues? An example of a multi-product firm with impatient customers illustrates an important choice facing operational researchers," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(4), pages 443-449, April.

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