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Market Segmentation, Advanced Demand Information and Supply Chain Performance

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  • Chen, F.

Abstract

A monopolist firm sells a single product to a market where the customers may be enticed to accept a delay in when their orders are shipped. The enticement is a discounted price for the product. The market consists of several segments with different degrees of aversion to delays. The firm offers a price schedule under which the customers each self-select the price they pay and when their orders are to be shipped. When a customer agrees to wait, the firm gains advanced demand information which can be used to reduce its supply chain costs. This article explores the costs and benefits of this pricing strategy.

Suggested Citation

  • Chen, F., 1999. "Market Segmentation, Advanced Demand Information and Supply Chain Performance," Papers 99-2, Columbia - Graduate School of Business.
  • Handle: RePEc:fth:colubu:99-2
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    References listed on IDEAS

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    Cited by:

    1. Guillermo Gallego & Özalp Özer, 2001. "Integrating Replenishment Decisions with Advance Demand Information," Management Science, INFORMS, vol. 47(10), pages 1344-1360, October.
    2. Fangruo Chen, 2001. "Market Segmentation, Advanced Demand Information, and Supply Chain Performance," Manufacturing & Service Operations Management, INFORMS, vol. 3(1), pages 53-67, February.
    3. Spinler, Stefan & Huchzermeier, Arnd, 2006. "The valuation of options on capacity with cost and demand uncertainty," European Journal of Operational Research, Elsevier, vol. 171(3), pages 915-934, June.
    4. Liberopoulos, George, 2008. "On the tradeoff between optimal order-base-stock levels and demand lead-times," European Journal of Operational Research, Elsevier, vol. 190(1), pages 136-155, October.
    5. Du, Bisheng & Larsen, Christian, 2017. "Reservation policies of advance orders in the presence of multiple demand classes," European Journal of Operational Research, Elsevier, vol. 256(2), pages 430-438.
    6. Kunnumkal, Sumit & Topaloglu, Huseyin, 2008. "Price discounts in exchange for reduced customer demand variability and applications to advance demand information acquisition," International Journal of Production Economics, Elsevier, vol. 111(2), pages 543-561, February.
    7. Wijngaard, J., 2004. "The effect of foreknowledge of demand in case of a restricted capacity: The single-stage, single-product case," European Journal of Operational Research, Elsevier, vol. 159(1), pages 95-109, November.
    8. Jiang, Li & Geunes, Joseph, 2006. "Impact of introducing make-to-order options in a make-to-stock environment," European Journal of Operational Research, Elsevier, vol. 174(2), pages 724-743, October.
    9. Kim, Jindae & Tang, Kaizhi & Kumara, Soundar & Yee, Shang-Tae & Tew, Jeffrey, 2008. "Value analysis of location-enabled radio-frequency identification information on delivery chain performance," International Journal of Production Economics, Elsevier, vol. 112(1), pages 403-415, March.
    10. Tang, Dong, 2011. "Managing finished-goods inventory under capacitated delayed differentiation," Omega, Elsevier, vol. 39(5), pages 481-492, October.
    11. Anantaram Balakrishnan & Joseph Geunes & Michael S. Pangburn, 2004. "Coordinating Supply Chains by Controlling Upstream Variability Propagation," Manufacturing & Service Operations Management, INFORMS, vol. 6(2), pages 163-183, July.
    12. Liberopoulos, George & Koukoumialos, Stelios, 2005. "Tradeoffs between base stock levels, numbers of kanbans, and planned supply lead times in production/inventory systems with advance demand information," International Journal of Production Economics, Elsevier, vol. 96(2), pages 213-232, May.
    13. Liu, Heng & Özer, Özalp, 2010. "Channel incentives in sharing new product demand information and robust contracts," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1341-1349, December.
    14. Chen, Jing & Bell, Peter C., 2012. "Implementing market segmentation using full-refund and no-refund customer returns policies in a dual-channel supply chain structure," International Journal of Production Economics, Elsevier, vol. 136(1), pages 56-66.
    15. Kuthambalayan, Thyagaraj S. & Mehta, Peeyush & Shanker, Kripa, 2015. "Managing product variety with advance selling and capacity restrictions," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 287-296.
    16. Choi, Tsan-Ming (Jason) & Li, Duan & Yan, Houmin, 2006. "Quick response policy with Bayesian information updates," European Journal of Operational Research, Elsevier, vol. 170(3), pages 788-808, May.
    17. Ananth V. Iyer & Vinayak Deshpande & Zhengping Wu, 2003. "A Postponement Model for Demand Management," Management Science, INFORMS, vol. 49(8), pages 983-1002, August.

    More about this item

    Keywords

    MONOPOLIES ; PRICING ; PRODUCTION;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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