Competition under Time-Varying Demands and Dynamic Lot-Sizing Costs
We develop a competitive pricing model which combines the complexity of time-varying demand and cost functions and that of scale economies arising from dynamic lot sizing costs. Each firm can replenish inventory in each of the T periods into which the planing horizon is partitioned. Fixed as well as variable procurement costs are incurred for each procurement order, along with inventory carrying costs. Each firm adopts, at the beginning of the planning horizon, a (single) price to be employed throughout the horizon. Based on each period's system of demand equations, these prices determine a time series of demands for each firm, which needs to service them with an optimal corresponding dynamic lot sizing plan. We establish the existence of a price equilibrium and associated optimal dynamic lotsizing plans, under mild conditions and employing a close approximation for the optimal lotsizing costs. We also design efficient procedures to compute the equilibrium prices and dynamic lotsizing plans.
|Date of creation:||Jun 2004|
|Date of revision:||May 2008|
|Publication status:||Published in Naval Research Logistics Vol 56, No 1 (February 2009), pp 57Ð73.|
|Contact details of provider:|| Web page: http://www.lums.lancs.ac.uk/departments/ManSci/|
More information through EDIRC
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.:
- Jehoshua Eliashberg & Abel P. Jeuland, 1986. "The Impact of Competitive Entry in a Developing Market Upon Dynamic Pricing Strategies," Marketing Science, INFORMS, vol. 5(1), pages 20-36.
- Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 245-274.
- Howard Kunreuther & Linus Schrage, 1973. "Joint Pricing and Inventory Decisions for Constant Priced Items," Management Science, INFORMS, vol. 19(7), pages 732-738, March.
- Shlomo Kalish, 1983. "Monopolist Pricing with Dynamic Demand and Production Cost," Marketing Science, INFORMS, vol. 2(2), pages 135-159.
- van den Heuvel, Wilco & Wagelmans, Albert P.M., 2006.
"A polynomial time algorithm for a deterministic joint pricing and inventory model,"
European Journal of Operational Research,
Elsevier, vol. 170(2), pages 463-480, April.
- van den Heuvel, W. & Wagelmans, A.P.M., 2003. "A Polynomial Time Algorithm for a Deterministic Joint Pricing and Inventory Model," ERIM Report Series Research in Management ERS-2003-065-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
- Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
- Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003.
"Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data,"
American Economic Review,
American Economic Association, vol. 93(1), pages 15-37, March.
- Peter E. Rossi & Judith A. Chevalier & Anil K. Kashyap, 2002. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," Yale School of Management Working Papers ysm291, Yale School of Management.
- Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2000. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," NBER Working Papers 7981, National Bureau of Economic Research, Inc.
- Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
- Engelbert Dockner & Steffen Jørgensen, 1988. "Optimal Pricing Strategies for New Products in Dynamic Oligopolies," Marketing Science, INFORMS, vol. 7(4), pages 315-334.
- Gérard P. Cachon & Patrick T. Harker, 2002. "Competition and Outsourcing with Scale Economies," Management Science, INFORMS, vol. 48(10), pages 1314-1333, October.
- Clarke, Darral G & Dolan, Robert J, 1984. "A Simulation Analysis of Alternative Pricing Strategies for Dynamic Environments," The Journal of Business, University of Chicago Press, vol. 57(1), pages S179-200, January.
- Joseph Thomas, 1970. "Price-Production Decisions with Deterministic Demand," Management Science, INFORMS, vol. 16(11), pages 747-750, July.
When requesting a correction, please mention this item's handle: RePEc:lms:mansci:mrg-0003. 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: (Joern Meissner)
If references are entirely missing, you can add them using this form.