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Market Segmentation, Advanced Demand Information and Supply Chain Performance

  • Chen, F.

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.

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Paper provided by Columbia - Graduate School of Business in its series Papers with number 99-2.

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Length: 29 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:colubu:99-2
Contact details of provider: Postal:
U.S.A.; COLUMBIA UNIVERSITY, GRADUATE SCHOOL OF BUSINESS, PAINE WEBBER , New York, NY 10027 U.S.A

Phone: (212) 854-5553
Web page: http://www.gsb.columbia.edu/

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  1. de Groote, Xavier, 1994. "Flexibility and product variety in lot-sizing models," European Journal of Operational Research, Elsevier, vol. 75(2), pages 264-274, June.
  2. Kelvin Lancaster, 1990. "The Economics of Product Variety: A Survey," Marketing Science, INFORMS, vol. 9(3), pages 189-206.
  3. K. Sridhar Moorthy, 1984. "Market Segmentation, Self-Selection, and Product Line Design," Marketing Science, INFORMS, vol. 3(4), pages 288-307.
  4. John R. Hauser & Patricia Simmie, 1981. "Profit Maximizing Perceptual Positions: An Integrated Theory for the Selection of Product Features and Price," Management Science, INFORMS, vol. 27(1), pages 33-56, January.
  5. Chen, F., 1999. "Market Segmentation, Advanced Demand Information and Supply Chain Performance," Papers 99-2, Columbia - Graduate School of Business.
  6. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  7. Andrew J. Clark & Herbert Scarf, 2004. "Optimal Policies for a Multi-Echelon Inventory Problem," Management Science, INFORMS, vol. 50(12_supple), pages 1782-1790, December.
  8. Milgrom, Paul & Roberts, John, 1988. " Communication and Inventory as Substitutes in Organizing Production," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 275-89.
  9. Fangruo Chen & Yu-Sheng Zheng, 1994. "Lower Bounds for Multi-Echelon Stochastic Inventory Systems," Management Science, INFORMS, vol. 40(11), pages 1426-1443, November.
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