managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

a classification of literature on determining the lot size under quantity discounts abstract determining a lot size in the presence of either all units or incremental discounts has represented one of major interests of materials managers it is a common practice that the suppliers offer quantity discount to entice the buyers to purchase more and to achieve economies of scale for transportation and processing costs this paper will classify the literature on lot sizing determination under several types of discount schemes and discuss some of the significant literature in this area over two decades also some future research areas have been identified

nonlinear pricing in markets with interdependent demand this paper provides a mathematical framework for modeling demand and determining optimal price schedules in markets which have demand externalities and can sustain nonlinear pricing these fundamental economic concepts appear in the marketplace in the form of mutual buyers benefits and quantity discounts the theory addressing these aspects is relevant to a wide variety of goods and services examples include tariffs for electronic communications services pricing of franchises and royalty fees for copyrighted material and patents this paper builds on several previous results from microeconomics and extends nonlinear pricing to markets with demand externalities the implications of this price structure are compared to results obtained for flat rates and two part tariffs in a similar context a case study is described in which the results were applied to planning the startup of a new electronic communications service

consumption self control by rationing purchase quantities of virtue and vice consumers attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers pricing policies addressing theoreticians and practitioners alike this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self control problems for example many regular smokers buy their cigarettes by the pack although they could easily afford to buy 10 pack cartons these smokers knowingly forgo sizable per unit savings from quantity discounts which they could realize if they bought cartons by rationing their purchase quantities they also self impose additional transactions costs on marginal consumption which makes excessive smoking overly difficult and costly such strategic self imposition of constraints is intuitively appealing yet theoretically problematic the marketing literature lacks operationalizations and empirical tests of such consumption self control strategies and of their managerial implications this paper provides experimental evidence of the operation of consumer self control and empirically illustrates its direct implications for the pricing of consumer goods moreover the paper develops a conceptual framework for the design of empirical tests of such self imposed constraints on consumption in consumer goods markets within matched pairs of products we distinguish relative virtue and vice goods whose preference ordering changes with whet her consumers evaluate immediate or delayed consumption consequences for example ignoring long term health effects many smokers prefer regular relative vice to light relative virtue cigarettes because they prefer the taste of the former however ignoring these short term taste differences the same smokers prefer light to regular cigarettes when they consider the long term health effects of smoking these preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption this creates a potential self control problem because these consumers will be tempted to over consume the vices they have in stock at home purchase quantity rationing helps them solve the self control problem by limiting their stock and hence their consumption opportunities such rationing implies that per purchase occasion vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts we first test this prediction in two laboratory experiments we then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain wide store level demand across a variety of different pairs of matched vice regular and virtue reduced fat calorie or caffeine etc product categories the analyses of these experimental field and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as among others potato chips chocolate chip cookies cream cheese beer soft drinks ice cream and frozen yogurt chewing gum coffee and beef andturkey bologna vice consumers demand increases less in response to price reductions than virtue consumers demand although their preferences are not generally weaker for vices than for virtues constraints on vice purchases are self imposed and strategic rather than driven by simple preferences we suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption as a result of purchase quantity rationing however vice buyers forgo savings from price reductions through quantity discounts effectively paying price premiums for the opportunity to engage in self control thus purchase quantity rationing vice consumers are relatively price in sensitive from a managerial and public policy perspective our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self control they can charge premium prices for small sizes of vices relative to the corresponding quantity discounts for virtues virtue consumers on the other hand will buy larger amounts even when quantity discounts are relatively shallow a key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self constraining consumer behaviors empirically moreover this research is the first to extend previous theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making

analysis and applications of replenishment problems under stepwise transportation costs and generalized wholesale prices abstract in this study we analyze the replenishment decision of a buyer with the objective of maximizing total expected profits the buyer faces stepwise freight costs in inbound transportation and a hybrid wholesale price schedule given by a combination of all units discounts with economies and diseconomies of scale this general cost structure enables the model and the proposed solution to be also used for the supplier selection of a buyer under the single sourcing assumption we show that the buyer s replenishment problem reduces to finding and comparing the solutions of the following two subproblems i a replenishment problem involving wholesale prices given by an all units discount schedule with economies of scale and a lower bound on the replenishment quantity and ii a replenishment problem involving wholesale prices given by an all units discount schedule with diseconomies of scale and an upper bound on the replenishment quantity we propose solution methods for these two subproblems each of which stands alone as practical problems and utilize these methods to optimally solve the buyer s replenishment problem

note comments on a quantity discount pricing model to increase vendor profits monahan monahan j p 1984 a quantity discount pricing model to increase vendor profits management sci june 720 726 adapted the quantity discount model of inventory theory to the problem of determining an optimal quantity discount schedule from a vendor s point of view and opened up an important direction of research however his one item one customer one vendor model is based on several implicit assumptions that must be judged unreasonable monahan must account for the vendor s inventory carrying charges and redefine his variable s2 it is shown that a rational vendor s manufacturing frequency would not be identical to the buyer s ordering frequency if the vendor s manufacturing setup costs are substantially larger than the buyer s ordering costs a numerical example presented in this note also questions the practical usefulness of monahan s model even after its theoretical inaccuracies axe corrected monahan s model may explain discounts that are a fraction of 1 of the price of an item but it fails to explain commonly observed magnitudes of quantity discounts such as 10 of the unit price

competitive and cooperative inventory policies in a two stage supply chain we investigate a two stage serial supply chain with stationary stochastic demand and fixed transportation times inventory holding costs are charged at each stage and each stage may incur a consumer backorder penalty cost e g the upper stage the supplier may dislike backorders at the lower stage the retailer we consider two games in both the stages independently choose base stock policies to minimize their costs the games differ in how the firms track their inventory levels in one the firms are committed to tracking echelon inventory in the other they track local inventory we compare the policies chosen under this competitive regime to those selected to minimize total supply chain costs i e the optimal solution we show that the games nearly always have a unique nash equilibrium and it differs from the optimal solution hence competition reduces efficiency furthermore the two games equilibria are different so the tracking method influences strategic behavior we show that the system optimal solution can be achieved as a nash equilibrium using simple linear transfer payments the value of cooperation is context specific in some settings competition increases total cost by only a fraction of a percent whereas in other settings the cost increase is enormous we also discuss stackelberg equilibria

concurrent pricing and lot sizing for make to order contract production abstract this paper develops a model for the simultaneous i e concurrent determination of the inventory and pricing policies of a supplier which produces and supplies a product to a buyer on the basis of a contractual agreement calling for the delivery of a specific quantity periodically assuming that the customer is rational i e it follows its own optimal purchasing policy the objective of the supplier is to determine the product s selling price in conjunction with an appropriate production inventory policy so that a predetermined gross profit level is achieved it is further assumed that the supplier s production batch size is an integer multiple of the buyer s order quantity in formulating a mathematical model of this situation the interactions between the product s price the buyer s economic order quantity and the supplier s selling price costs and profit are taken into account for solving this model a simple iterative algorithm is proposed which is illustrated through a numerical example sensitivity analysis performed on the model demonstrates that it is relatively robust and quite insensitive to errors in estimating the buyer s ordering to carrying cost ratio on the part of the producer

soil and water conservation technology adoption and labour allocation evidence from ethiopia abstract soil and water conservation swc technologies are viewed as part of a solution to increase the resilience of the agriculture sector to climate change research has shown that swc technologies are effective at controlling erosion and increasing yields but are labour intensive however the quantification of their labour impacts remains an important research gap in this paper i estimate the labour impacts of adopting swc technologies in ethiopia using an endogenous switching regression model esrm i find that adopting swc technologies increases plot level adult labour by 35 impacts on child labour depend on the number of adults in the household specifically estimated impacts range from 29 for the full sample to 78 for the sub sample of households with fewer than three adults i also find some evidence of negative self selection in the case of child labour which suggests that adopters have a comparative advantage since they are able to adopt the technology with smaller impacts on child labour as a result of unobservable characteristics the estimated labour impacts also provide a plausible explanation for why farmers may not adopt swc technologies despite their economic profitability ultimately the paper argues that understanding the heterogeneity and magnitude of the labour impacts is an important part of understanding potential trade offs of adopting swc technologies given the estimated labour impacts policies that relax the household s labour constraints could be an effective mechanism to spur the adoption of labour intensive environmentally agricultural practices while minimizing potential negative effects

coordinating advertising and pricing in a manufacturer retailer channel abstract cooperative advertising is a practice that a manufacturer pays retailers a portion of the local advertising cost in order to induce sales cooperative advertising plays a significant role in marketing programs of channel members nevertheless most studies to date on cooperative advertising have assumed that the market demand is only influenced by advertising expenditures but not by retail price this paper addresses channel coordination by seeking optimal cooperative advertising strategies and equilibrium pricing in a two member distribution channel we establish and compare two models a non cooperative leader follower game and a cooperative game we develop propositions and insights from the comparison of these models the cooperative model achieves better coordination by generating higher channel wide profits than the non cooperative model with these features a the retailer price is lower to consumers and b the advertising efforts are higher for all channel members we identify the feasible solutions to a bargaining problem where the channel members can determine how to divide the extra profits

how many parts to make at once reprinted from factory the magazine of management volume 10 number 2 february 1913 pp 135 136 152 interest on capital tied up in wages material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time set up costs on the job fix the minimum experience has shown one manager a way to determine the economical size of lots

price competition with reduced consumer switching costs the case of wireless number portability in the cellular phone industry wireless number portability wnp is a telecommunication regulatory policy that requires cellular phone service providers to allow customers who switch service subscriptions to retain their original phone numbers the right to retain the number lowers the switching cost for a consumer thus the purpose of the policy is to induce more competition and facilitate the growth of new or small service providers in this paper we show that wnp drives market price downward as expected but with a surprising twistrather than helping the smaller firms grow the policy may accelerate the process of market concentration we find that the main contributing factor to this peculiarity is the discriminatory pricing scheme prevalent in the industrythat is a service provider charges a lower per minute fee for the calls initiated and received within the same network than for the calls connected across two networks under this pricing scheme a consumer who subscribes to a larger network would benefit more than if subscribing to a smaller network despite the relatively higher fixed access fee that the former may charge by lowering the barrier of switching wnp creates a market condition conducive for a larger network to gain market share we support our analysis with the empirical evidence gathered from hong kong where wnp was adopted in march 1999

multi buyer discount pricing abstract this article gives an exact optimal solution to the problem of finding the optimal discount price and price break quantity for a seller dealing with one buyer it also gives a method for solving the problem when one seller offers a single quantity discount schedule to many buyers the discount is of the all quantity type and the model of the cost structure was originally proposed by crowther

supplier manufacturer coordination in capacitated two stage supply chains abstract manufacture to order is an increasingly popular strategy in commodity electronics and other similar markets where many different product configurations can be produced from common components to succeed in this environment manufacturers need to keep both cost and order fulfillment time low in this article we compare three different mechanisms that a manufacturer whose revenues depend on order delays may use to affect its component supplier s inventory decisions these mechanisms are specifying components inventory level offering a share of the earned revenues to the supplier called simple revenue sharing and offering a two part revenue sharing scheme we show that whereas the first two approaches do not lead to supply chain coordination the two part scheme does we demonstrate with numerical experiments that up to a point the component supplier benefits from having a high utilization of its production facility whereas the manufacturer benefits from having excess production capacity

comment managing channel profits comment in a recent paper in this journal jeuland and shugan jeuland a s shugan 1983 managing channel profits marketing sci 2 summer 239 272 proposed a quantity discount schedule as a way of coordinating a channel as they put it on p 253 of their paper a quantity discount schedule which would fix the retailer s and hence the manufacturer s profits to some fixed linear function of total channel profits would lead the channel to maximize profits the purpose of this note is to show that a quantity discount schedule is not necessary for channel coordination

discount pricing for a family of items the supplier s optimal decisions abstract consider a family of skus for which the supplier will offer a quantity discount according to the aggregate purchases of the product group management of those items is based on the modified periodic policy from the supplier s point of view what are the optimal parameters breakpoint and discount percentage for deterministic demand we discuss the cases in which demand is both constant and price sensitive first as a noncooperative stackelberg game and then when the two parties make the discount and replenishment decisions jointly we illustrate the impact of price sensitivity and joint decision making on the supplier s discount policy

chapter 11 pricing models in marketing publisher summary this chapter brings together a set of diverse efforts in the recent literature on the modeling of price decisions and related questions in marketing there has been an impressive growth in the array of topics investigated in the literature various trends in the development of pricing models are evident from the foregoing review first one trend has been to develop theoretical models to describe observed pricing strategies in the marketplace and to derive conditions under which certain strategies are optimal this trend is clearly evident when one considers the area of dynamic pricing models another trend is an attempt to develop pricing models in which certain aspects of consumer behavior e g asymmetric response to price increases versus price decreases are incorporated this development is quite recent and does offer a large potential a third dominant direction is the use of game theoretic models for developing equilibrium pricing strategies

note the role of returns policies in pricing and inventory decisions for catalogue goods manufacturers often use returns policies to encourage retailers to stock and price items more aggressively we focus on the effect that such policies have on both a retailer s and a manufacturer s profits when the retailer must commit prior to the selling season to both a stocking quantity and a price at which to sell an item such a commitment is often necessary for retailers who sell primarily through catalogues

supplier pricing and lot sizing when demand is price sensitive abstract the problem of co ordination between a vendor and a buyer is formulated as a two person fixed threat bargaining game the vendor decides on his lot size and the price schedule he is to offer to the buyer the buyer decides upon his lot size and the selling price in the market we have characterized pareto efficient solutions and the nash bargaining solution for the problem we have also proposed two pricing schedules for the vendor who is supplying to a large population of buyers the first one is based upon profit sharing the second one resembles the classical all unit quantity discount schedule we have thus provided for the supplier a procedure for setting all unit quantity discount schedule

jit purchasing vs eoq with a price discount an analytical comparison of inventory costs abstract the inventory costs of purchasing under economic order quantity eoq model with a quantity discount is determined and compared to the costs under just in time jit it is shown that at low levels of demand jit is the preferred method whereas eoq has the cost advantage for an item with a high demand the model also predicts that the higher the value of the item the carrying cost or the ordering cost associated with the eoq model and the smaller the quantity discount rate the wider will be the range of demand for which jit remains preferable

nonlinear pricing to produce information we investigate the firm s dynamic nonlinear pricing problem when facing consumers whose tastes vary according to a scalar index we relax the standard assumption that the firm knows the distribution of this index in general the firm should determine its marginal price schedule as if it were myopic and produce information by lowering the price schedule bunching consumers at positive purchase levels should be avoided as a special case we also consider a market characterized by homogeneous consumers with a static but unknown demand curve we show that when there are repeat purchases the forward looking firm should tend towards penetration pricing otherwise its strategy should tend towards skimming we extend our insights to more general settings and discuss implications for pricing product lines

impact of off farm income on food security and nutrition in nigeria abstract while the poverty implications of off farm income have been analyzed in different developing countries much less is known about the impact of off farm income on household food security and nutrition here this research gap is addressed by using farm survey data from nigeria econometric analyses are employed to examine the mechanisms through which off farm income affects household calorie and micronutrient supply dietary quality and child anthropometry we find that off farm income has a positive net effect on food security and nutrition the prevalence of child stunting underweight and wasting is lower in households with off farm income than in households without using a structural model we also show that off farm income contributes to higher food production and farm income by easing capital constraints thus improving household welfare in multiple ways

evaluating jointly constrained order quantity complexities for incremental discounts abstract in this paper we consider the purchasing decisions facing a buying firm which receives incrementally discounted price schedules for a group of items in the presence of constraints such as budgets and space limitations the constraints take the form of upper bounds on positively weighted linear combinations of order size dollar volume unit price and order frequency we adapt the solution procedures from an earlier paper naval res logis 40 2 1993 255 to treat this case the results show that simultaneous order quantities for multiple items offered with separate incremental discounts and subject to joint resource constraints can be calculated efficiently using a combination of lagrangean relaxation and as needed partial enumeration this problem proved to be no more and no less tractable than its counterpart with all units discounts

competitive nonlinear tariffs abstract this paper generalizes the study of nonlinear tariffs i e those depending nonlinearly on the quantity purchased to the case of a symmetric oligopoly competitive equilibria and the corresponding tariffs are analyzed in a cournot framework various equilibria are obtained which depend both upon the number of competing suppliers and the choice of market parameters used to characterize the competitors strategies buyers are classified by type each selecting an optimal consumption level in response to the prevailing tariff the phenomena of buyer self selection found in monopoly nonlinear pricing and the scaling of equilibrium demand elasticity found in cournot models both appear in the results

reply on comments on a quantity discount pricing model to increase vendor profits professor joglekar is to be thanked for his generally insightful comments 1988 concerning my paper monahan monahan j p 1984 a quantity discount pricing model to increase vendor points management sci 306 june 720 726 he has in my view correctly assessed the limitations of two important production assumptions i made assumptions which need to be rethought in any quantity discount pricing models of the future yet although i find myself in general agreement with joglekar s comments i wish to clarify some points concerning the model and its potential applicability

ford whitman harris and the economic order quantity model ford whitman harris first presented the familiar economic order quantity eoq model in a paper published in 1913 even though harris s original paper was disseminated widely it apparently was unnoticed for many years before its rediscovery in 1988 during this period much confusion developed over the origin of the eoq model this paper explores the early literature on this model and traces the evolution of the confusion it also sketches the remarkable life of harris who made contributions as an engineer inventor author and patent attorney even though he received no formal education beyond high school harris s original 1913 essay is reprinted following this paper

ex post impacts of improved maize varieties on poverty in rural ethiopia public agricultural research has been conducted in africa for decades while many studies have examined its aggregate impacts few have investigated how it affects the poor this paper helps fill this gap by applying a new procedure to explore the ex post impacts of improved maize varieties on poverty in rural ethiopia plot level yield and cost changes due to adoption are first estimated using instrumental variable and marginal treatment effect techniques where possible heterogeneity is carefully accounted for a backward derivation procedure is then developed to link treatment effect estimates with an economic surplus model to identify the counterfactual household income that would have existed without improved maize varieties poverty impacts are finally estimated by exploiting the differences between observed and counterfactual income distributions improved maize varieties have led to a 0 8 1 3 percentage drop of poverty headcount ratio and relative reductions of poverty depth and severity however poor producers benefit the least from adoption due to the smallness of their land holdings

optimal pricing and inventory strategies with multiple price markdowns over time abstract we study a multiple period discount problem for products that undergo several price cuts over time in the high technology sector electronic component suppliers are often able to offer pre announced price cuts to buyers due to technological innovation that allows them to produce existing components at lower costs in this context suppliers are primarily concerned with the optimal pricing decisions for the components over their life spans in order to achieve the highest possible revenues accordingly the buying firms i e manufacturers or retailers also need to identify the corresponding optimal retail prices and order quantity for the finished products that utilize the components for which discounts are offered frequently in this research we develop a multiple period price discount model that addresses this issue extant research in the price discount literature focuses on supply chains pricing and inventory decisions in the presence of a single price discount the proposed model in contrast offers a systematic decision tool for identifying the optimal strategies throughout a product s life span our results show that a decentralized supply chain characterized by multi period discounts over a product s life typically achieves 75 percent supply chain efficiency we undertake a series of numerical experiments based on the model and discuss their managerial implications

an approach for developing an optimal discount pricing policy this paper addresses the problem of why and how a seller should develop a discount pricing structure even if such a pricing structure does not alter ultimate demand the situation modeled is most appropriate where the seller s product does not represent a major component of the buyer s final product where the demand for the product is derived or where the price is only one of many factors considered in making a purchase decision a model of buyer reaction to any given pricing scheme is developed to show that there exists a unified pricing policy which motivates the buyer to increase its ordering quantity per order thereby reducing the joint buyer and seller ordering and holding costs as a result the seller is able to reduce its costs while leaving the buyer no worse off and often better off the model is extended to handle variable ordering and shipping costs and situations where the seller faces numerous groups of buyers each having different ordering policies finally a case study is presented explicitly showing how the proposed pricing policy can be applied to the situation of a large seller selling to a number of different buyer groups

heuristics for sourcing from multiple suppliers with alternative quantity discounts in this paper we analyze the impact of supplier pricing schemes and supplier capacity limitations on the optimal sourcing policy for a single firm we consider the situation where the total quantity to be procured for a single period is known by the firm and communicated to the supplier set in response to this communication each supplier quotes a price and a capacity limit in terms of a maximum quantity that can be supplied to the buyer based on this information the buyer makes a quantity allocation decision among the suppliers and corresponding to this decision is the choice of a subset of suppliers who will receive an order based on industry observations a variety of supplier pricing schemes from the constituent group of suppliers are analyzed including linear discounts incremental units discounts and all units discounts given the complexity of the optimization problem for certain types of pricing schemes heuristic solution methodologies are developed to identify a quantity allocation decision for the firm through an extensive computational comparison we find that these heuristics generate near optimal solutions very quickly data from a major office products retailer is used to illustrate the resulting sourcing strategies given different pricing schemes and capacity limitations of suppliers in this industry we find for the case of capacity constrained suppliers the optimal quantity allocations for two complex pricing schemes linear discount and incremental units discount are such that at most one selected supplier will receive an order quantity that is less than its capacity

the impacts of public sustainability concerns on length of product line abstract this paper studies how the public sustainability concerns affect a firm s decisions of product line design under different channel structures both centralized distribution channel and decentralized distribution channel are taken into consideration our research shows that the public sustainability concerns can make the centralized firm shorten its product line when the coefficient of consumer mismatching disutility is moderate in addition when the centralized firm makes the decision of product line extension from the aspect of maximizing social welfare a relative low level of the public sustainability concerns can incent it to extend the product line the public sustainability concerns are shown to be able to weaken the positive impact of channel decentralization that has on product line extension when the coefficient of consumer mismatching disutility is moderate as well

towards a more economic production and just in time delivery system abstract we study a system in which a batch production supplier participates in just in time jit delivery of its products to a jit buyer firm we demonstrate that under certain conditions a small adjustment of previously agreed product selling price can result in a more economic production and jit delivery system with reduced delivery quantity and hence increased delivery frequency in the case when both buyer and supplier share equal profit margin optimal levels of adjustment for price and delivery frequency can be obtained that maximize the profit margin a numerical example is used to illustrate the results

discount pricing decisions in distribution channels with price sensitive demand abstract in this paper we evaluate the effectiveness of quantity discounts and volume discounts as coordination mechanisms in distribution channels with demand that is price sensitive we consider a single vendor single retailer distribution channel demand for the product arises only at the retailer the demand faced by the retailer is assumed to be deterministic but price elastic the retailer in turn buys the product from the vendor the vendor and the retailer act independently and rationally each maximizing their own respective profit the equilibrium point that specifies the vendor s and buyer s inventory and pricing policy is determined by the solution to a stackelberg game we consider the cases when quantity discount and volume discount respectively are offered we develop methods to determine the optimal discount policy for these cases we then consider the case where both volume and quantity discounts are offered simultaneously and develop a method to determine the optimal simultaneous discount offer the relative performance of the alternative discount schemes is then evaluated through a numerical study the results of the study demonstrate that the effectiveness of volume discount as a coordination mechanism is higher when the sensitivity of demand to price changes is higher the effectiveness of quantity discount on the other hand is higher with lower price sensitivity of demand finally the results also demonstrate that perfect coordination is achieved when volume and quantity discounts are offered simultaneously

optimal pricing and inventory control policy with quantity based price differentiation a firm facing price dependent stochastic demand aims to maximize its total expected profit over a planning horizon in addition to the regular unit selling price the firm can utilize quantity discounts to increase sales we refer to this dual pricing strategy as quantity based price differentiation at the beginning of each period the firm needs to make three decisions replenish the inventory set the unit selling price if the unit sales mode is deployed and set the quantity discount price if the quantity sales mode is deployed or the combination of the two modes of sales we identify conditions under which the optimal inventory control policy and selling pricing strategy is well structured remarkably under a utility based demand framework these conditions can be unified by a simple regularity assumption that has long been used in the auction and mechanism design literature moreover sharper structural results are yielded for the optimal selling strategy we also examine the comparative advantag

auctioning supply contracts this paper studies a procurement problem with one buyer and multiple potential suppliers who hold private information about their own production costs both the purchase quantity and the price need to be determined an optimal procurement strategy for the buyer requires the buyer to first design a supply contract that specifies a payment for each possible purchase quantity and then invites the suppliers to bid for this contract the auction can be conducted in many formats such as the english auction the dutch auction the first priced sealed bid auction and the vickrey auction the winner is the supplier with the highest bid and is given the decision right for the quantity produced and delivered applying this theory to a newsvendor model with supply side competition this paper establishes a connection between the above optimal procurement strategy and a common practice in the retail industry namely the use of slotting allowances and vendor managed inventory also discussed in the newsvendor context are the role of well known supply contracts such as returns contracts and revenue sharing contracts in procurement auctions the scenarios where the buyer and suppliers may possess asymmetric information about the demand distribution and how the cost of supply demand mismatch is affected by supply side competition finally this paper compares the optimal procurement strategy with a simpler but suboptimal strategy where the buyer first determines a purchase quantity and then seeks the lowest cost supplier for the quantity in an auction

a fuzzy mathematical model for the joint economic lot size problem with multiple price breaks abstract this paper applies fuzzy mathematical programming to solve the joint economic lot size problem with multiple price breaks in order to entice the buyer to increase the order quantity it is a common practice for the seller to offer quantity discounts to the buyer from the system viewpoint the joint cost for the seller and buyer can be minimized only when the buyer increases his economic order quantity the problem is how to determine the number of price breaks as well as the quantity discount and order quantity at each price break to achieve the optimal joint cost fuzzy mathematical programming provides a very efficient algorithm to solve the above problem simultaneously from the perspectives of the seller and the buyer another common problem in joint economic lot size model is how to split the system profit between the seller and the buyer whereas the traditional approach to this problem is to divide the profit based on a certain ratio determined by the bargaining power of both parties fuzzy mathematical programming can achieve the same satisfaction level to both parties based on their respective cost functions

group buying on the web a comparison of price discovery mechanisms web based group buying mechanisms are being widely used for both business to business b2b and business to consumer b2c transactions we survey currently operational online group buying markets and then study this phenomenon using analytical models we build on the literatures in information economics and operations management in our analytical model of a monopolist offering web based group buying under different kinds of demand uncertainty we derive the monopolist s optimal group buying schedule under varying conditions of heterogeneity in the demand regimes and compare its profits with those that obtain under the more conventional posted price mechanism we further study the impact ofproduction postponement by endogenizing the timing of the pricing and production decisions in a two stage game between the monopolist and buyers our results have implications for firms choice of price discovery mechanisms in e markets and for the scheduling of production and pricing decisions in the presence and absence of scale economies of production

the common cycle approach to the elsp problem with insufficient capacity abstract a production facility is used to produce more than a single item in order to maximize its utilization this however introduces a well known phenomenon of interference which gives rise to the class of economic lot scheduling problems in solving this problem researchers have always assumed that the production capacity is high enough to meet the demand of all items that are produced in this paper we relax the capacity constraint and analyze the lot scheduling problem under insufficient capacity we specifically study the two product problem using the common cycle approach and then discuss a special extension that treats any number of products

an incremental discount pricing schedule with multiple customers and single price break abstract this paper analyzes how a supplier can formulate the terms of a quantity discount pricing schedule assuming a single incremental discount system a model is developed from which an algorithm is derived for an optimal discount schedule the cases are investigated in which both the discount rate and the break point are unknown and either one is prescribed a numerical example is presented to illustrate the algorithm developed

on supply chain coordination for false failure returns a quantity discount contract approach abstract a large proportion of consumer returns fall into the category of false failure returns which refer to returns without functional defects in this paper we consider profits resulting from exerting costly effort to reduce false failure returns in a reverse supply chain the supply chain as a whole has a strong incentive to reduce such returns for cost saving however retailers typically enjoy a full credit provided by suppliers for returns so they may not have sufficient incentives to exert enough effort for supply chain profit maximization in some scenarios retailers may even have the motivation to encourage such returns we suggest using a coordination contract to resolve this profit conflict we introduce a quantity discount contract which specifies a payment to the retailer with an amount exponentially decreasing in the number of returns we present explicit forms of such contracts given different assumptions about the distribution of the number of returns we also prove that the contract is pareto improving besides it is shown that when the contract is applied in a closed loop supply chain it can deter retailer s potential incentive to encourage returns moreover some modifications of the contract can lead to easy allocation of supply chain profit

a cooperative game theory model of quantity discounts quantity discounts offered by a monopolist are considered in the context of a bargaining problem in which the buyer and the seller negotiate over the order quantity and the average unit price all units and incremental quantity discounts that permit transaction at a negotiated outcome are described the effects of risk sensitivity and bargaining power on quantity discounts are discussed for alternative bargaining models

a taxonomy and research overview of perishable asset revenue management yield management overbooking and pricing this paper proposes the term perishable asset revenue management to denote the field that combines the areas of yield management overbooking and pricing for perishable assets after summarizing the characteristics common to problems in this field the paper discusses the objectives and constraints faced by decision makers then it offers a comprehensive taxonomy with 14 different elements and reviews the research that has been done related to each element finally it suggests some important areas of future research that can help bridge the gap between theory and application

strategic effects of three part tariffs under oligopoly the distinct element of a three part tariff 3pt compared with linear pricing lp or a two part tariff is its quantity target within which the marginal price is zero this quantity target instrument enriches the firm s strategy set in dictating the competition to a specific level even in the absence of a usual price discrimination motive with general differentiated linear demands the competitive effect of a 3pt in contrast to lp depends on the degree of substitutability between products competition is intensified when two products are more differentiated yet softened when two products are more substitutable

economic order quantities in production from harris to economic lot scheduling problems abstract this article provides a short historical overview from harris and his economic order quantity eoq formula to the economic lot scheduling problem elsp the aim is to describe the development of the elsp field from the eoq formula to the advanced methods of today in a manner that suits master and graduate students the article shows the complexities difficulties and possibilities of scheduling and producing several different items in a single production facility with constrained capacity the items have different demand cost operation time and set up time set up time consumes capacity and makes the scheduling more complicated idle time makes the scheduling easier but is bad from a practical point of view since it creates unnecessary costs due to low utilisation of the facility a heuristic solution method is used on a small numerical example to illustrate different solution approaches the solution method creates a detailed schedule and estimates the correct set up and inventory holding cost even if the facility works close to its capacity

unfair allocation of gains under the equal price allocation method in purchasing groups certain purchasing groups do not flourish a supposed reason for this is a creeping dissatisfaction among various members of a group with the allocation of the cooperative gains in this paper we analyze unfairness resulting from using the commonly used equal price ep method for allocating gains under the assumption of continuous quantity discounts we demonstrate that this unfairness is caused by neglecting a particular component of the added value of individual group members next we develop two fairness ratios and tie these to fairness properties from cooperative game theory the ratios show among other things that being too big a player in a purchasing group can lead to decreasing gains they can be used to assess if ep is an unfair method in specific situations finally we discuss measures a purchasing group could consider in order to attenuate perceived unfairness thereby the group may improve its stability and prosperity

does adaptation to climate change provide food security a micro perspective from ethiopia we examine the driving forces behind farmers decisions to adapt to climate change and the impact of adaptation on farmers food production we investigate whether there are differences in the food production functions of farm households that adapted and those that did not adapt we estimate a simultaneous equations model with endogenous switching to account for the heterogeneity in the decision to adapt or not and for unobservable characteristics of farmers and their farm we compare the expected food production under the actual and counterfactual cases that the farm household adapted or not to climate change we find that the group of farm households that adapted has systematically different characteristics than the group of farm households that did not adapt the relationship between production and average temperature is inverted u shaped for farm households that adapted while it is u shaped for farm households that did not adapt and vice versa in the case of precipitation we find that adaptation increases food production however the impact of adaptation on food production is smaller for the farm households that actually did adapt than for the farm households that did not adapt in the counterfactual case that they adapted

please or squeeze brand performance implications of constrained and unconstrained multi item promotions existing research on price promotions typically investigates the effects of single product promotions however brand managers often promote multiple items simultaneously to bolster the performance of a complete brand line this paper investigates the brand performance implications of such multi item promotions we distinguish between two types of multi item promotions traditional unconstrained multi item promotions that grant a discount irrespective of the size or composition of the purchase set and constrained multi item promotions that require consumers to purchase specific quantities self bundling or even predetermined combinations fixed bundling of promoted items using a normative consumer decision model the authors analyze the relative effectiveness of these promotions in terms of unit sales and revenue impact and show that promotion performance is moderated by consumers preference for variety the authors find that unconstrained multi item promotions outperform single item promotions especially in markets without variety seeking in markets with variety seeking unconstrained multi item promotions are not as effective in stealing extra sales from competition because consumers prefer to spread their purchases across all items including competitive ones however in those markets self bundling promotions are particularly effective because they force consumers to adopt larger amounts of the promoted items at the expense of competitors finally in neither type of market does fixed bundling substantially improve promotion performance

the marketing channel as an equilibrium set of contracts nash bargaining theory and recent developments in economic contract theory are employed in the analysis of the marketing channels individual dyadic contracts involving payment schedules between members of a simple 3 level channel are investigated with particular reference to monitoring problems and intrachannel power relations the interrelations between individual contracts are examined and the equilibrium set of contracts constituting the channel derived the performance of the channel in terms of risk sharing allocative efficiency and the distribution of gains is then evaluated it is found that the risk aversion of channel members and the cost of monitoring and enforcement affect channel efficiency and that under certain types of interdependencies and externalities the nature of the power structure is crucial to channel efficiency

revisiting foundations in lot sizing connections between harris crowther monahan and clark abstract while many review articles exist on deterministic lot sizing models used in the context of price and quantity discounts buyer vendor coordination supply chain management and joint economic lot sizing problems they do not convey the impact of important findings which date back to at least 2002 or in hindsight to 1984 as a result many recent articles still model the financial implications of lot sizing decisions without having the assurance that these models would help the firm s involved in maximising the net present value npv this paper therefore reviews these findings while adding also its own contributions as to convey the general importance to lot sizing theory we show that the underlying principles used in the four key articles that have led to a division in modelling approaches are in fact all in line with npv and argue that therefore there should not be these discrepancies that currently persist in the literature we establish the connections between these four strands of the literature using the solution to a simple variation of harris eoq model deriving thereby results from boyaci and gallego 2002 and beullens and janssens 2011 but showing their general applicability to any type of supply chain structure the breath of implications to deterministic lot sizing theory is illustrated using practical examples we present a stochastic version of the model of crowther 1964 which is arguably the least understood and applied model but on the other hand the most important one in realising how these modelling strands can be unified

market segmentation self selection and product line design the purpose of this paper is to develop a theory of market segmentation based on consumer self selection the extant theory is based on the third degree price discrimination model of pigou central assumptions of which are that the firm can directly address individual segments and isolate them by using consumer self selection i am relaxing these assumptions in the context of a monopolist designing a product line i show that this relaxation has significant implications for how the products and prices are chosen and what they look like in particular segments may be aggregated even though there are no economies of scale furthermore consumer self selection enables us to model cannibalization and competition among firms

modeling quantity discounts under general price sensitive demand functions optimal policies and relationships this paper presents models for determining optimal all unit and incremental quantity discount policies and investigates the effect of quantity discounts on increasing demand and ensuring pareto efficient transactions under general price sensitive demand functions the paper develops optimal quantity discount policies investigates their interrelationships and their benefits to both the supplier and the buyer and gains managerial insights for the scenarios of maximizing the supplier s profit and the joint profit we develop simple and efficient solution approaches for determining the all unit and the incremental optimal decision policies for general price sensitive demand functions we have three main findings first with price sensitive demand there are two incentives in offering quantity discounts increasing demand and ensuring pareto efficient transactions in most cases increasing demand dominates in justifying the offering of quantity discounts second using a single lot size associated with all efficient transactions as with the constant demand case does not hold with the price sensitive demand case third the optimal all unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in benefiting both the supplier and the buyer

coordinating ordering and pricing decisions in a two stage distribution system with price sensitive demand through short term discounting abstract we consider a short term discounting model in which the distributor offers a discounted price for the retailers orders placed at the beginning of its replenishment cycle in a non cooperative distribution system with one distributor and multiple retailers each facing price sensitive demand we examine the value of the price discount strategy as a mechanism for the distributor to coordinate the retailers ordering and pricing decisions under two common types of demand linear demand in price and constant elasticity demand in price our numerical study reveals that in the presence of homogeneous retailers namely retailers with identical demand rates the distributor s profit improvement due to coordination generally decreases as the number of retailers or the inventory holding cost rate increases but increases as price elasticity increases although an increase in the inventory holding cost rate has a negative effect on the distributor s profit it may have a positive effect on the retailers profits we further find that with heterogeneous retailers namely retailers with different demand rates offering a discounted price under linear demand benefits the distributor when both the inventory holding cost rate and the variation in demand are either small or large this cross effect however is absent under constant elasticity demand

quantity discounts managerial issues and research opportunities marketing managers frequently administer pricing policies involving substantial quantity discounts however our understanding of the precise role of these discounts and their design is quite limited this paper reviews and integrates the economics and marketing literature and presents a detailed analysis of the policies of four firms in order to i specify the variety of motivations for quantity discounts ii provide guidelines to managers in designing quantity discount schedules and iii set out the most fruitful directions for future research

eoq jit and fixed costs in the ready mixed concrete industry the successful implementation of just in time jit purchasing policy in many industries has prompted many companies that still use the economic order quantity eoq purchasing policy to ponder if they should switch to the jit purchasing policy despite existing studies that directly compare the costs between the eoq and jit purchasing systems this decision is however still difficult to be made especially when price discount has to be considered jit purchasing may not always be successful even though plants that adopted jit operations have experienced or can take advantage of physical space reduction hence the objective of this study is to expand on a classical eoq with a price discount model to derive the eoq jit cost indifference point the objective was tested and achieved through a survey and case study conducted in the ready mixed concrete industry in singapore

marketing production coordination in channels of distribution abstract in this paper we analyze the effects of functional horizontal decentralization by a channel member on the performance of an industrial channel of distribution we use the model of eliashberg j steinberg r 1987 management science 33 981 1000 which describes a channel of distribution consisting of a manufacturer and a value adding distributor we allow the distributor to decentralize decision making between his marketing and production functions our results show that functional decentralization at the distributor level increases the price sensitivity of the distributor concerning the price he faces from the manufacturer causes a shift in the distributor s demand curve increases the distributor s inventory activities in terms of both quantity and time frame and under certain conditions increases the manufacturer s inventory as expected the decentralized distributor has a less coordinated pricing policy vis a vis the production policy using numerical means we show that functional decentralization can improve the overall channel profitability i e for both manufacturer and distributor this counter intuitive result suggests that in our non repeated perfect information game setting functional decentralization can yield a pareto dominant equilibrium outcome where both the distributor and manufacturer are better off even though it is only the distributor who is changing his organizational decision making

lot sizes in a capacity constrained facility a simulation study of stationary stochastic demand abstract this paper considers the scheduling of several different items on a single machine in literature known as the economic lot scheduling problem elsp one of the characteristics of this problem is that the demand rate is deterministic and constant however in a practical situation demand usually varies in this paper we examine if a deterministic model can be used if demand is stationary stochastic a dynamic programming approach from bomberger manage sci 12 11 1966 778 and a heuristic method from segerstedt int j production econom 59 1 3 1999 469 are used to calculate lot sizes for four items the production of these items is simulated with different variations in demand rates our conclusion is that a deterministic model of this kind can be used in a practical situation where the demand rate is stationary stochastic but the models must be complemented by a decision rule which item to produce and when to produce it in our tests the heuristic method and the dynamic programming approach perform rather similarly with respect to costs and inventory levels but the dynamic programming approach results in more backorders when there is small variation in demand rates this study indicates that the model used for determination of lot sizes is of less importance than the decision rule used for identification of the item to produce and when to produce it

all units quantity freight discounts with disposals abstract this paper examines the effect of various freight rate structures and quantity discounts on the inventory policies of roi and profit maximizing firms with downward sloping price elastic demand lot sizing policies and price set at a markup on unit cost units not sold at the regular price are disposed of at a reduced price both the markup and the order quantity are decision variables numerical examples are used throughout to illustrate the properties of the model and the sensitivity of the optimal solutions to fluctuations in the parameters

a procurement decision support system in business volume discount environments emergence of a new discount pricing schedule called business volume discount becomes a major obstacle for procurement managers in finding the best purchasing strategy in the context of business volume discount a supplier offers discounts on total dollar amount of sales volume not on the quantity or variety of the products purchased from the supplier this paper describes a procurement decision support system pdss that has been successfully implemented to improve the purchasing activities of regional bell telephone companies in most purchasing operations a flexible procurement plan is considered a necessity because of the uncertainties associated with product demand and procurement budget pdss provides this flexibility by combining two different purchasing strategies purchasing on an annual commitment basis and on an as ordered basis although the development of the system is motivated by a particular application procurement of transmission plug in in one of the regional telephone companies the system is being used for a variety of procurement decisions involving business volume discount in the telecommunications industry the results of the implementation indicate that cost savings of up to 15 are achieved pdss use is not limited to the companies in the telecommunications industry the pdss model is applicable to any organization having a centralized procurement operation with business volume discount

a choice model for packaged goods dealing with discrete quantities and quantity discounts utility maximizing solutions to economic models of choice for goods with either discrete quantities or non linear prices cannot always be obtained using standard first order conditions such as kuhn tucker and roy s identity when quantities are discrete there is no guarantee that derivatives of the utility function are equal to derivatives of the budget constraint moreover when prices are nonlinear as in the case of quantity discounts first order conditions can be associated with the minimum rather than the maximum value of utility in these cases the utility function must be directly evaluated to determine its maximum this evaluation can be computationally challenging when there exist many offerings and when stochastic elements are introduced into the utility function in this paper we provide an economic model of demand for substitute brands that is flexible parsimonious and easy to implement the methodology is demonstrated with a scanner panel data set of light beer purchases the model is used to explore the effects of price promotions on primary and secondary demand and the utility of product assortment

channel coordination and quantity discounts this paper presents a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers the joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees both the annual demand rate and the operating cost including the purchase ordering and inventory holding costs depend on the joint decision policy employed this paper contributes by integrating work addressing quantity discounts on inventory and ordering policies and work focusing on the control mechanism provided by quantity discounts in channel coordination it is shown that the optimal all unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in achieving channel coordination furthermore it is shown that quantity discounts alone are not sufficient to guarantee joint profit maximization the analyses of the general models are illustrated by specific analytical results obtained for a given demand function

designing a firm s coordinated manufacturing and supply decisions with short product life cycles in this paper we consider a problem of joint coordination between a firm s manufacturing and supply departments the manufacturing department is responsible for meeting random demand of a product with a short life cycle the supply department s responsibility is to provide the sufficient amount of raw materials so that the required production level can be achieved when coordination prevails both departments decisions are jointly made otherwise decisions are made independently without an exchange of information if the random demand exceeds the amount produced a second production run can be expedited at a substantially higher cost our analysis yields insightful results to such a coordination problem between the two departments we provide conditions under which it is desirable to coordinate resulting in a significant increase in expected profit if coordination is optimal then the supply department would purchase additional reserved material for the second run under this scenario we analyze the effects of joint coordination on the expected profit we also find explicit conditions for which joint coordination is not beneficial i e the supply department should only order sufficient material to meet the first production run requirements we provide a detailed set of numerical examples and generate response surfaces indicating the desirability of coordination for different pairs of parameter combinations

a generalized quantity discount pricing model to increase supplier s profits in this paper the joint problem of ordering and offering price discount by a supplier to his sole major buyer is analyzed the objective is to induce the buyer to alter his order schedule and size so that the supplier can benefit from lower set up ordering and inventory holding costs we generalize the quantity discount pricing model of monahan monahan j p 1984 a quantity discount pricing model to increase vendor profits management sci 30 6 720 726 to 1 explicitly incorporate constraints imposed on the amount of discount that can be offered and 2 relax the implicit assumption of a lot for lot or order for order policy adopted by the supplier an algorithm is developed to solve the supplier s joint ordering and price discount problem

designing price contracts for boundedly rational customers does the number of blocks matter when designing price contracts one of the major questions confronting managers is how many blocks there should be in the contract we investigate this question in the setting of a manufacturer retailer dyad facing a linear deterministic consumer demand theoretical marketing models predict that the manufacturer s profits rise dramatically when the number of blocks in the contract is increased from one to two because both channel efficiency and its share of channel profits increase however increasing the number of blocks to three yields no incremental profits we test these predictions experimentally and find that increasing the number of blocks from one to two raises channel efficiency but not the manufacturer s share of profits surprisingly having three blocks in the contract increases channel efficiency even further and also gives the manufacturer a slightly higher share of profits we show that these results can be explained by a quantal response equilibrium model in which the manufacturer accounts for noisy best response due to nonpecuniary payoff components in the retailer s utility we also show that the retailer is sensitive to the counterfactual profits it could have earned if it were charged a lower marginal price for earlier blocks in the multiple block contract

an empirical analysis of price discrimination mechanisms and retailer profitability abstract retailers typically engage in some form of price discrimination to increase profitability in this article the authors compare the impact on retailer profitability of two price discrimination mechanisms quantity discounts based on package size second degree price discrimination and store level pricing or micromarketing third degree price discrimination whereas the latter has been well addressed in the marketing literature there is limited empirical research on the use of quantity discounts for price discrimination using store level sales data the authors estimate a structural demand model accounting for parameter heterogeneity and price endogeneity they combine the parameter estimates with a model of retailer pricing to conduct optimal pricing and profitability simulations under several scenarios ranging from constraining the retailer not to engage in any form of price discrimination to the least restrictive scenario of setting nonlinear price schedules specific to each store the pr

impact of off farm income on food expenditures in rural bangladesh an unconditional quantile regression approach this study examines the effects of off farm income on food expenditures of rural bangladeshi households our analysis yields unbiased estimates of the unconditional impact of off farm income on food expenditures and reveals the heterogeneous effects that occur across the distribution of total food consumption expenditures the findings suggest that the impacts of off farm income are uniformly positive across the unconditional quantile regression and significantly increase food consumption expenditures for all quantiles except for the 25th quantile in addition we found that schooling experience and location of the household increase the food expenditures of rural households most importantly this article argues that female headed rural households in which the female works off the farm tend to have significantly lower food expenditures

quantity discounts under demand uncertainty to motivate buyers to increase their order quantity suppliers often rely on a well established and widely used approach they offer quantity discounts this practice is in large part driven to obtain improved economies in transportation through higher truckload utilization recently transportation rates which are increasing faster than other costs have become a larger portion of total net landed cost placing the traditional quantity discount practices under scrutiny many suppliers are left perplexed as to why their approach is not effective anymore and some are even concerned that their overall profits may have actually decreased due to their discount parameters in this paper we study a multiperiod model with a buyer facing stochastic end item demand and a supplier offering an all units quantity discount to him to understand better the dynamics of such systems we provide guidelines and insights on how to set effective discount parameters and when not to expect much from them we derive the opt

coalition formation problem for sourcing contract design in supply networks abstract this article studies a coalition formation problem for cooperative replenishment with a single supplier and multiple firms we consider that a vertical cooperation between the supplier and the set of firms is already set using periodic individual contracts and we investigate the profitability of a horizontal cooperation between firms when designing collaborative contracts given the significant savings that can be realized thanks to horizontal collaboration the main interest of the potential collaborating firms is to figure out how the collaborating group should be formed and how stable alliances and coalitions should be generated in this article the two questions are studied in two business situations focusing either on the collaboration opportunities in the ordering or the transportation process in each collaborative situation a decision making approach is applied to assess the expected profitability of each firm and to determine if firms should form coalitions to maximize their profits an exact solution method based on a game theoretic approach is developed called cooperative replenishment algorithm cra which generates core stable coalitions for cost savings regarding all partner standpoints an analytical study of stability conditions regarding the ordering and transportation cost structures were performed to enhance the cra resolution procedure extensive experiments based on realistic instances are provided to validate the performance of the cra proposed in terms of solution stability and convergence the computational results also confirm the potential benefit of horizontal collaboration between firms in terms of profit maximization compared to the stand alone situation

how to price discriminate when tariff size matters firms that serve a large market with many diverse consumer types use discriminatory or nonlinear pricing to extract higher revenue inducing consumers to separate by self selecting from a large number of tariff options but the extent of price discrimination must often be tempered by the high costs of devising and managing discriminatory tariffs including costs of supporting consumers in understanding and making selection from a complex menu of choices these tariff design trade offs occur in many industries where firms face many consumer types and each consumer picks the number of units to consume over time examples include wireless communication services other telecom and information technology products legal plans fitness clubs automobile clubs parking healthcare plans and many services and utilities this paper evaluates alternative ways to price discriminate while accounting for both revenues and tariff management costs the revenue maximizing menu of quantity price bundles can be very or infinitely large and hence not practical instead two part tariffs 2pts which charge a fixed entry fee and a per unit fee can extract a large fraction of the optimal revenue with a small menu of choices and they become more attractive once the costs of tariff management are factored in we show that three part tariffs 3pts which use an additional instrument the free allowance are an even more efficient way to price discriminate a relatively small menu of 3pts can be more profitable than a menu of 2pts of any size this 3pt menu can be designed with less information about consumer preferences relative to the menu of two part tariffs which in order to segment customers optimally needs fine grained information about preferences our analysis reveals a counterintuitive insight that more complex tariffs need not always be more profitable it matters whether the complexity is from many choices or more pricing instruments

optimal lot sizing integration policy under learning and rework effects in a manufacturer retailer chain abstract most research in economic manufacturing order quantity management assumes that all products are of perfect quality and are produced at a constant production rate one result of this assumption is that the number of units produced in a given period is constant which is not the case in real life most production systems produce items which are of perfect quality along with some that are of imperfect quality defective items as well as the learning effect affect production and inventory costs thereby shaping the performance of the manufacturer retailer chain the present study uses the nash stackelberg and cooperation games to model an imperfect production system to investigate the combined effects of lot sizing size integration the learning effect imperfect production and the rework process on a manufacturer retailer channel this study also demonstrates the optimal properties of the proposed models develops a search algorithm for obtaining optimal solutions and conducts a numerical study to seek structural and quantitative insights into the structure of the proposed models in addition it analyzes the sensitivity of the solutions in relation to the major parameters

optimal nonuniform prices we consider optimal nonuniform pricing schedules where the price depends upon the amount purchased such schedules are regularly used by public utilities and other services welfare optimal nonuniform prices are related to the theory of optimal uniform prices developed by ramsey we characterize situations in which upward or downward discontinuities in pricing schedules are optimal our results are applicable to a number of related problems including optimal taxation insurance and incentives economic theory has confined most of its attention to markets with uniform prices in which the price per unit charged is invariant to the level of a customer s purchases this focus is warranted when goods are resellable since any attempt to charge nonuniform prices could be circumvented by reselling amongst customers but when goods are not resellable nonuniform prices are not only possible but common public utilities have declining block pricing with lower unit charges for large levels of consumption many agencies providing services including communications transportation even education use two part pricing with a fixed entry or retainer charge and a further charge per unit consumption nonuniform price schedules can be expected to be ever more common as services become a larger fraction of total output the increasing prevalence of nonuniform pricing policies have made them the focus of recent public and economic attention oi 1971 feldstein 1972 and ng and weisser 1974 have examined optimal two part pricing policies leland and meyer 1976 examine block pricing and show by example that optimal welfare policies may require nonuniform prices if zero profit constraints are binding in this paper we consider arbitrary nonuniform pricing policies using variational techniques two part and block pricing schedules are of course special cases of the environment we consider the work most closely related to our examination is the seminal paper by spence 1978 and subsequent analysis by roberts 1979 spence however does not pay explicit attention to the key role played by constraints on optimal pricing schedules roberts considers upward price discontinuities which lead to bunching of consumers at a given level of consumption but not downward price discontinuities which lead to regions in which no consumer chooses to consume gaps bunching or gaps may appear in the optimal price schedule even when underlying demand and cost functions are smooth and well behaved the prevalence of discontinuous pricing schedules e g the block pricing structures of public utilities argues that these questions are of practical as well as theoretical interest

coordination mechanisms of supply chain systems supply chain management scm has become an important management paradigm as supply chain members are often separate and independent economic entities a key issue in scm is to develop mechanisms that can align their objectives and coordinate their activities so as to optimize system performance in this paper we provide a review of coordination mechanisms of supply chain systems in a framework that is based on supply chain decision structure and nature of demand this framework highlights the behavioral aspects and information need in the coordination of a supply chain the identification of these issues points out several directions of future research in this area

celebrating a century of the economic order quantity model in honor of ford whitman harris abstract this writing presents a brief introduction to the papers included in the special issue celebrating a century of the economic order quantity model in honor of ford whitman harris published by the international journal of production economics forty one papers covering an extensive scope of inventory management have been incorporated in this volume from contributing authors from 20 countries located in america asia europe and africa this special issue also provides a basis for new directions in inventory management research

the coordinated replenishment dynamic lot sizing problem with quantity discounts abstract in the classical coordinated replenishment dynamic lot sizing problem the primary motivation for coordination is in the presence of the major and minor setup costs in this paper a separate element of coordination made possible by the offer of quantity discounts is considered a mathematical programming formulation for the extended problem under the all units discount price structure and the incremental discount price structure is provided then using variable redefinitions tighter formulations are presented in order to obtain tight lower bounds for reasonable size problems more significantly as the problem is np hard we present an effective polynomial time heuristic procedure for the incremental discount version of the problem that is capable of solving reasonably large size problems computational results for the heuristic procedure are reported in the paper

soil erosion and smallholders conservation decisions in the highlands of ethiopia abstract soil erosion is one of the most serious environmental problems in ethiopia coupled with growing populations falling per capita food production and worsening poverty loss of productive land due to land degradation undermines rural livelihoods and national food security despite their awareness of the erosion problem peasants investments in land have been limited we use an applied nonseparable model to simulate conservation decisions pervasive market imperfections poverty and high rates of time preference seem to undermine erosion control investments lack of technologies which provide quick returns to subsistence constrained peasants also seem to deter such investments lower private incentives to internalize the intertemporal land degradation externality may require public intervention

for a few cents more why supersize unhealthy food health care experts believe that increases in portion sizes served by food vendors contribute to the obesity epidemic this paper shows that food vendors can profit handsomely by using supersizing strategies where regular portion sizes are priced sufficiently high to discourage price conscious consumers from selecting them and the prices for enlarging food portions are set so low that these customers are tempted to order the larger portion sizes and overeat setting aside the impact of obesity on health care costs we show that using supersizing to steer customers toward consuming excessive amounts of food can destroy value from a social perspective thus this social value destruction trap adds another justification for pressuring food vendors to reduce supersizing for unhealthy food as a public policy response we consider how moderating policies may counter these effects through measures designed specifically to encourage eating in moderation by applying supersizing bans taxes and warnings

optimal product line design when consumers exhibit choice set dependent preferences in a market of consumers with varying willingness to pay using product line as a discrimination tool may extract higher profits than serving all consumers with a single product local context effects however point to yet another consideration in designing product lines how the appeal of a product changes with the context provided by other products in the choice set i present a model of product line design that incorporates both discrimination and context management goals and offers recommendations for the variety and positioning of products to this end the model makes use of a framework that allows preferences to be choice set dependent given this framework i study how the firm manages externalities between products created by such dependencies the firm creates distortions above and beyond those resulting from discrimination motives alone for example in a vertically differentiated market for quality quality distortions exist even for the consumers with the highest valuations the range of quality provisions given the number of products is compressed as the relative importance of unfavorable comparisons among products increases surprisingly this compression may even lead the firm to forego discrimination among consumers regardless of the cost of offering distinct products

two echelon supply chain coordination through the unified number of annual orders abstract this paper studies the problem of how to coordinate a one supplier multi retailer supply chain by requiring retailers to adopt the unified number of annual orders proposed by the supplier the paper presents two coordination models one considering a small number of retailers the other considering a large number of retailers in the proposed models the supplier views all retailers or some selected retailers if more beneficial in the supply chain as one group then offers a price discount to entice the retailers in this group placing their orders only with the specific number of annual orders a heuristic is developed for each model to let the supplier know which retailers will be selected to implement the common number of annual orders and how to determine the corresponding optimal number of annual replenishments and price discount by using a numerical study we evaluate the benefit of the proposed coordination strategy

single supplier multiple buyer supply chain coordination incorporating buyers expectations under vertical information sharing abstract we address the coordination problem in a single supplier multiple buyer supply chain the supplier wishes to coordinate the supply chain by offering quantity discounts to obtain their complete cost information the supplier exchanges his own cost parameters with buyers leading to vertical information sharing the supplier thinks that the buyers as they have access to supplier s setup and holding cost information may demand a portion of the anticipated coordination savings based on the partial information they hold about the cost structure of the entire supply chain we model each buyer s expectations based on her limited view of the entire supply chain which consists of herself and the supplier only these expectations are then incorporated into the modeling of the supply chain which results in a generalization of the traditional stackelberg type models we discuss alternative efficiency sharing mechanisms and propose methods to design the associated discount schemes that take buyers expectations into account in designing the discount schemes we consider both price discriminatory and non price discriminatory approaches the study adds to the existing body of work by incorporating buyers expectations into a constrained stackelberg structure and by achieving coordination without forcing buyers to explicitly comply with the supplier s replenishment period in choosing their order quantities the numerical analysis of the coordination efficiency and allocation of the net savings of the proposed discount schemes shows that the supplier is still able to coordinate the supply chain with high efficiency levels and retain a significant portion of the net savings

inventory dynamics time lags and efficiency measures abstract standard measures employed to examine efficiency such as production efficiency in manufacturing are static in nature standard methods typically employ a stock flow approach to measure turnover and delay this is a first estimate but an inadequate approach since production processes are time dependent and dynamic this study examines theoretical issues concerning the standard method of measuring efficiency indices and introduces a refined dynamic measurement methodology the standard and proposed methodologies are applied to financial data for us tire and rubber goods industry to demonstrate the empirical differences between the two measures