the dynamics of the leverage cycle abstract we present a simple agent based model of a financial system composed of leveraged investors such as banks that invest in stocks and manage their risk using a value at risk constraint based on historical observations of asset prices the value at risk constraint implies that when perceived risk is low leverage is high and vice versa a phenomenon that has been dubbed pro cyclical leverage we show that this leads to endogenous irregular oscillations in which gradual increases in stock prices and leverage are followed by drastic market collapses i e a leverage cycle this phenomenon is studied using simplified models that give a deeper understanding of the dynamics and the nature of the feedback loops and instabilities underlying the leverage cycle we introduce a flexible leverage regulation policy in which it is possible to continuously tune from pro cyclical to countercyclical leverage when the policy is sufficiently countercyclical and bank risk is sufficiently low the endogenous oscillation disappears and prices go to a fixed point while there is always a leverage ceiling above which the dynamics are unstable countercyclical leverage policies can be used to raise the ceiling we also study the impact on leverage cycles of direct temporal control of the bank s riskiness via the bank s required value at risk quantile under such a rule the regulator relaxes the value at risk quantile following a negative stock price shock and tightens it following a positive shock while such a policy rule can reduce the amplitude of leverage cycles its effectiveness is highly dependent on the choice of parameters finally we investigate fixed limits on leverage and show how they can control the leverage cycle

perishable inventory theory a review this paper reviews the relevant literature on the problem of determining suitable ordering policies for both fixed life perishable inventory and inventory subject to continuous exponential decay we consider both deterministic and stochastic demand for single and multiple products both optimal and sub optimal order policies are discussed in addition a brief review of the application of these models to blood bank management is included the review concludes with a discussion of some of the interesting open research questions in the area

taming macroeconomic instability monetary and macro prudential policy interactions in an agent based model abstract we develop an agent based model to study the macroeconomic impact of alternative macro prudential regulations and their possible interactions with different monetary policy rules the aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability simulation results show that a triple mandate taylor rule focused on output gap inflation and credit growth and a basel iii prudential regulation is the best policy mix to improve the stability of the banking sector and smooth output fluctuations moreover we consider the different levers of basel iii and their combinations we find that minimum capital requirements and counter cyclical capital buffers allow to achieve results close to the basel iii first best with a much more simplified regulatory framework finally the components of basel iii are non additive the inclusion of an additional lever does not always improve the performance of the macro prudential regulation

a special case of dynamic pricing policy this article studies the implications of experience curves and brand loyalty for optimal dynamic pricing policy in a continuous time model we synthesize several results from the literature on open loop equilibria specifically we show that prices should decrease over time for high discount rates and steeper exogenous declines in variable costs conversely the prices should increase over time if experience curves affect fixed costs and if consumers are brand loyal

pricing and scheduling decisions with leadtime flexibility this paper studies a problem faced by a manufacturer who has the ability to set prices to influence demand reject orders and set leadtimes or due dates for accepted orders we present decision models that integrate pricing and production decisions for the cases where the manufacturer charges the same price or different prices to different customers through numerical analyses we present insights regarding the benefits of price customization leadtime and inventory flexibilities in various demand environments

optimal dynamic pricing of inventories with stochastic demand over finite horizons in many industries managers face the problem of selling a given stock of items by a deadline we investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm s objective is to maximize expected revenues examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry which markets space such as seats on airline flights cabins on vacation cruises and rooms in hotels that become worthless if not sold by a specific time we formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp price as a function of the stock level and the length of the horizon for a particular exponential family of demand functions we find the optimal pricing policy in closed form for general demand functions we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity finally we extend our results to the case where demand is compound poisson only a finite number of prices is allowed the demand rate is time varying holding costs are incurred and cash flows are discounted the initial stock is a decision variable and reordering overbooking and random cancellations are allowed

will dynamic pricing outperform theoretical analysis and empirical evidence from o2o on demand food service market abstract this study attempts to identify the pricing strategy of three most commonly used on demand food service platforms in china based on detailed information of more than 240 000 orders and further evaluates the impact of pricing strategy on platform performance we find that some platforms adopt dynamic pricing strategies while other platforms adopt static pricing strategies considering the unique structure of the o2o on demand food service market in china we develop a dyadic two sided market theory and demonstrate that compared with static pricing strategies dynamic pricing strategies perform better consistent with our theory our empirical analysis also suggests that platforms adopting dynamic pricing strategies have a significantly higher level of demand compared with platforms adopting static strategies in addition our results indicate the importance of delivery speed red envelopes and ratings in promoting demand

pricing and lot sizing polices for perishable goods when the demand depends on selling price displayed stocks and expiration date abstract price is a major factor on the demand based on marketing and economic theory in addition the demand for perishable products also depends on its freshness moreover it is a well known fact that increasing stock display e g fresh fruits vegetables baked goods may encourage consumers to purchase more this paper first proposes an inventory model that stipulates the demand explicitly in a multivariate function of price freshness and displayed stocks it may be profitable to have a closeout sale at a markdown price and always keep on hand displayed stocks fresh and plentiful if the demand is freshness and stock dependent hence the traditional assumption of zero ending inventories is relaxed to a non zero ending inventory as a result the objective is to determine three decision variables i e unit price cycle time and ending inventory level in order to maximize the total profit then it is demonstrated that the total profit is strictly pseudo concave in those three decision variables which reduces the search for solutions to a unique local maximum finally numerical examples to illustrate the theoretical results and to highlight managerial insights are presented

single period multiproduct inventory models with substitution we study a single period multiproduct inventory problem with substitution and proportional costs and revenues we consider n products and n demand classes with full downward substitution i e excess demand for class i can be satisfied using product j for i j we first discuss a two stage profit maximization formulation for the multiproduct substitution problem we show that a greedy allocation policy is optimal we use this to write the expected profits and its first partials explicitly this in turn enables us to prove additional properties of the profit function and several interesting properties of the optimal solution in a limited computational study using two products we illustrate the benefits of solving for the optimal quantities when substitution is considered at the ordering stage over similar computations without considering substitution while ordering specifically we show that the benefits are higher with high demand variability low substitution cost low profit margins or low price to cost ratio high salvage values and similarity of products in terms of prices and costs

retail pricing and clearance sales sellers of new products are faced with having to guess demand conditions to set price appropriately but sellers are able to adjustprice over time and to learn from past mistakes additionally it is not necessary that all goods be sold with certainty it is sometimes better to set a high price and to risk no sale this process is modeledto explain retail pricing behavior and the time distribution of transactions prices start high and fall as a function of time on theshelf the initial price and rate of decline can be predicted and depends on thinness of the market the proportion of customers who are window shoppers and other observable characteristics copyright 1986 by american economic association

economic lot sizing and dynamic quantity competition abstract we study a problem of dynamic quantity competition in continuous time with two competing retailers facing different replenishment cost structures retailer 1 faces fixed ordering costs and variable procurement costs and all inventory kept in stock is subject to holding costs retailer 2 only faces variable procurement costs both retailers are allowed to change their sales quantities dynamically over time following the structure of the economic order quantity eoq model retailer 1 places replenishment orders in batches and retailer 2 follows a just in time jit policy the objective of both retailers is to maximize their individual average profit anticipating the competitor s replenishment and output decisions the problem is solved by a two stage hierarchical optimization approach using backwards induction the second stage model is a differential game in output quantities between the two retailers for a given cycle length at the first stage the replenishment policy is determined we prove the existence of a unique optimal solution and derive an open loop nash equilibrium we show that both retailers follow contrary output strategies over the order cycle the eoq retailer driven by inventory holding costs decreases his market share whereas the output of the jit retailer increases moreover depending on the cost structure the eoq retailer might partially be a monopolist at the first stage the eoq retailer determines the cycle length anticipating the optimal output trajectories at the second stage

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

optimal discounting and replenishment policies for perishable products abstract we consider a retailer selling a perishable product with short shelf life and uncertain demand facing these key decisions a whether to discount old er items b how much discount to offer and c what should be the replenishment policy in order to better understand the impact of consumer behavior and shelf life on these decisions we consider four models in model a the product has a shelf life of two periods and the retailer decides whether or not to offer a discount the amount of discount is exogenous and assumed to be large enough so that all the customers prefer the old product to the new one when a discount is offered based on several numerical examples we find that a threshold discounting policy in which a discount is offered if and only if the inventory of old product is below a threshold is optimal in model b the retailer also decides how much discount to offer model c extends model b and considers a new pool of customers who are willing to purchase from the retailer when a discount is offered in both models b and c the product has a shelf life of two periods while model d explores what happens with longer shelf life we analyze and compare these models to present different managerial insights

on pricing of perishable assets with menu costs we consider dynamic pricing of perishable assets in the presence of price sensitive renewal demand processes unlike the existing works in the literature we explicitly incorporate non negligible price change costs which reflects the revenue management practice more realistically these costs are also known as menu costs in the economic literature the objective is to maximize the discounted expected profit for an initial inventory of q items by determining the selling prices dynamically we employ a dynamic programming approach and formulate a model that captures the price demand relationship we establish some theoretical results on the properties of the problem at hand specifically we establish the sufficient conditions under which the within period profit is concave in the selling price and in the remaining shelf life and furthermore show the structure of the myopically and asymptotically optimal pricing policy in a numerical study we investigate the impact of various system parameters and in particular the existence of menu costs on pricing decisions we observe that ignoring menu costs may be significantly misleading for the implementation of revenue management we also propose four implementable policy heuristics and examine their performances our findings support some results previously obtained in settings with continuous pricing and negligible price change costs and contradict some others 2009 published by elsevier b v

adaptive ordering and pricing for perishable products we consider the combined problem of pricing and ordering for a perishable product with unknown demand distribution and censored demand observations resulting from lost sales faced by a monopolistic retailer we develop an adaptive pricing and ordering policy with the asymptotic property that the average realized profit per period converges with probability one to the optimal value under complete information on the distribution the pricing mechanism is modeled as a multiarmed bandit problem while the order quantity decision made after the price level is established is based on a stochastic approximation procedure with multiplicative updates

an order level lot size inventory model with inventory level dependent demand and deterioration abstract many inventory models have been developed for various deteriorating items with constant demand rate it is a common experience that for perishable consumer goods the age of inventory has a negative impact on the demand due to the loss of consumer confidence on such product consumers tend to keep off perishable items which have reached closer to their expiry dates this paper describes an inventory model in which the demand is considered as a composite function consisting of a constant component and a variable component which is proportional to the inventory level in the periods when there is a positive inventory buildup the rate of production is considered finite and the decay rate as exponential the total cost function is composed of four cost components of all phases of the cycle backorder replenishment inventory buildup inventory depletion and shortage this cost function is later reduced to a two variable function using boundary relations to determine iteratively the set of values of the variables that resulted in minimum cost per cycle the optimum lot size and order level were then obtained with relations established previously results are demonstrated for an instance of the model

joint pricing and production decisions with yield uncertainty and downconversion abstract we consider a firm who supplies two types of products high end and low end because of the uncertainty in the production process the yield rate of the high end products is uncertain the substandard high end products caused by the yield uncertainty can be transformed into the low end products with a certain cost we characterize the optimal pricing and production decisions and develop an algorithm to compute the optimal solution we also investigate the impact of the yield uncertainty on the firm s performance and explore how stability of market demand emergent fulfillment costs and downconversion cost influence this effect we find that i the profit of the firm deteriorates when the risk of the yield uncertainty is high in the face of yield uncertainty the firm prefers to decrease increase the production quantity of the high end low end products ii when the market demands are quite unstable the emergent fulfillment costs are low or the downconversion cost is high the firm has a low incentive to eliminate the yield uncertainty

simulation study of the price differentiation effect in a stochastic deteriorating inventory with heterogeneous consumers freshness sensitivity a fixed price policy regardless of expiration date may result in unsold inventory and sales loss price reduction over time as the expiration date approaches motivates customers to purchase all items including the ones that are left with only a short interval until their expiration we conduct a discrete event simulation that captures the main characteristics of this phenomenon results show that a moderate differentiation of price increases profits by 6 a larger differentiation reduces profits profits are the highest for freshness oriented customers a fixed price policy is preferred in an environment of large variance and expected near term expirations

dynamic pricing of inventory capacity with infrequent price changes we consider a problem of dynamically pricing a single product sold by a monopolist over a short time period if demand characteristics change throughout the period it becomes attractive for the company to adjust price continuously to respond to such changes i e price discriminate intertemporally however in practice there is typically a limit on the number of times the price can be adjusted due to the high costs associated with frequent price changes if that is the case instead of a continuous pricing rule the company might want to establish a piece wise constant pricing policy in order to limit the number of price adjustments such a pricing policy which involves optimal choice of prices and timing of price changes is the focus of this paper we analyze the pricing problem with a limited number of price changes in a dynamic deterministic environment in which demand depends on the current price and time and there is a capacity inventory constraint that may be set optimally ahead of the selling season the arrival rate can evolve in time arbitrarily allowing us to model situations in which prices decrease increase or neither we consider several plausible scenarios where pricing and or timing of price changes are endogenized various notions of complementarity single crossing property supermodularity and total positivity are explored to derive structural results conditions sufficient for the uniqueness of the solution and the monotonicity of prices throughout the sales period furthermore we characterize the impact of the capacity constraint on the optimal prices and the timing of price changes and provide several other comparative statics results additional insights are obtained directly from the solutions of various special cases

bundle pricing of inventories with stochastic demand we consider a retailer selling a fixed inventory of two perishable products over a finite horizon assuming poisson arrivals and a bivariate reservation price distribution we determine the optimal product and bundle prices that maximize the expected revenue our results indicate that the performances of mixed bundling pure bundling and unbundled sales strategies heavily depend on the parameters of the demand process and the initial inventory levels bundling appears to be most effective with negatively correlated reservation prices and high starting inventory levels when the starting inventory levels are equal and in excess of average demand most of the benefits of bundling can be achieved through pure bundling however the mixed bundling strategy dominates the other two when the starting inventory levels are not equal we also observe that an incorrect modeling of the reservation prices may lead to significant losses the model is extended to allow for price changes during the selling horizon it is shown that offering price bundles mid season may be more effective than changing individual product prices

the dynamics of municipal fiscal adjustment abstract the dynamic fiscal policy adjustment of local jurisdictions is investigated empirically using a panel of more than 1000 u s municipalities over a quarter of a century distinguishing own source revenue grants expenditures and debt service the analysis is carried out using a vector error correction model which takes account of the intertemporal budget constraint the results indicate that a large part of the adjustment in response to fiscal imbalances takes place by offsetting changes in future expenditures in addition the results show that fiscal imbalances are financed to a significant extent by subsequent changes in grants decomposition of the sample according to average city population reveals that the basic pattern of fiscal adjustment is robust although intergovernmental grants play a much more pronounced role in maintaining budget balance for large cities

joint inventory allocation and pricing decisions for perishable products abstract we jointly determine the price and the inventory allocation for a perishable product with a predetermined lifetime we assume that the price of the product increases as the time when it perishes approaches as in the airline industry demand for the product is price sensitive to maximize the expected revenue we developed a discrete time dynamic programming model to obtain the optimal prices and the optimal inventory allocations for the product with a two period lifetime we then proposed three heuristics when the lifetime is longer than two periods the computational results showed that the expected revenues from the proposed heuristics were very close to that of the optimal solution we extended these results to i the case where the price for the product consistently decreases and ii the case where the price for the product first increases and later decreases

unimodality of price setting newsvendor s objective function with multiplicative demand and its applications abstract we present a general solution framework for the price setting newsvendor problem with a multiplicative stochastic demand under mild assumptions such as increasing price elasticity on the mean demand function and increasing generalized failure rate on the distribution of the random factor we first prove that both the profit function with respect to price and its derived function with respect to order quantity are quasi concave three applications are then studied under our solution framework 1 we consider a wholesale price only contract by which a manufacturer sets a wholesale price and a newsvendor determines an order quantity and the retail price and show that the manufacturer s profit function is unimodal with respect to retailing price or stocking factor under certain conditions 2 we consider a newsvendor problem in which the demand depends on both the retail price and the level of sales effort and the cost exerting the sales effort is proportional to the order quantity we prove that there exists a unique pair of price and sales effort levels that maximize the total profit this result is established under a set of mild assumptions on the demand and cost functions 3 we identify a property in the single period profit function that satisfies condition 1 of huh and janakiraman 2008 which in turn guarantees the optimality of s s policy for an infinite stationary dynamic inventory price control system with lost sales and fixed order costs finally the unimodality of the newsvendor problem with a general stochastic and price sensitive demand is studied

inventory models with inventory level dependent demand a comprehensive review and unifying theory marketing researchers and practitioners have long recognized the demand of many retail items is proportional to the amount of inventory displayed recently two distinct types of inventory control models reflecting this relationship have appeared in the literature models in which the demand rate of an item is a function of the initial inventory level and those in which it is dependent on the instantaneous inventory level we present a comprehensive overview of this literature and demonstrate the equivalence of the two types of models through the use of a simple periodic review model an alternative approach to sensitivity analysis for inventory models with inventory level dependent demand is also presented

leverage cycles and the anxious economy ing opportunities for emerging economies their access to international markets has turned out to be very volatile with frequent periods of market closures even worse as we will show emerging economies with sound fundamentals are the ones that issue less debt during these closures the goal of this paper is to present a theory of asset pricing that will shed light on the problems of emerging assets like emerging markets that are not yet mature enough to be attractive to the general public their marginal buyers are liquidity constrained investors with small wealth relative to the whole economy who are also marginal buyers of other risky assets we will use our theory to argue that the periodic problems faced by emerging asset classes are sometimes symptoms of what we call a global anxious economy rather than of their own fundamental weaknesses

resource allocation to defensive marketing and manufacturing strategies abstract in this paper we investigate the coordinated use of marketing and manufacturing strategies to formulate a defensive business strategy for an incumbent firm upon market entry while defensive marketing strategies have been researched extensively little has been done on defensive manufacturing strategies and even less on coordinating these two we propose a formulation for the joint formation of a defensive strategy by the marketing and production functions under budget constraint considerations the incumbent firm may allocate its resourcesto advertising and distribution expenditures as well as to manufacturing investments to reduce the unit production cost the incumbent firm has also the option of simply allocating all of its resources purely to advertising and distribution we show that while there exist cases where the optimal reaction to entry involves investments in manufacturing improvements there are also cases where defense is in marketing strategies alone we identify the market conditions that promote such reactions to entry and also provide sensitivity analysis

costly search and mutual fund flows this paper studies the flows of funds into and out of equity mutual funds consumers base their fund purchase decisions on prior performance information but do so asymmetrically investing disproportionately more in funds that performed very well the prior period search costs seem to be an important determinant of fund flows high performance appears to be most salient for funds that exert higher marketing effort as measured by higher fees flows are directly related to the size of the fund s complex as well as the current media attention received by the fund which lower consumers search costs

demand uncertainty and sales a study of fashion and markdown pricing the theory of clearance sales is expanded and applied to explain why markups markdowns and the frequency of sales of merchandise sold by department stores have increased dramatically in recent years and why they differ across merchandise groups tha major theme of the paper is that the growing role of fashion and product variety is an important reason for these increases and for the differences between merchandise groups the growing importance of fashion is illustrated by documenting the declining use of whites and the increasing use of colors and prints estimates of the effects of imports and technological and demographic changes on markups and markdowns are presented copyright 1988 by american economic association

leverage induced systemic risk under basle ii and other credit risk policies abstract we use a simple agent based model of value investors in financial markets to test three credit regulation policies the first is the unregulated case which only imposes limits on maximum leverage the second is basle ii and the third is a hypothetical alternative in which banks perfectly hedge all of their leverage induced risk with options when compared to the unregulated case both basle ii and the perfect hedge policy reduce the risk of default when leverage is low but increase it when leverage is high this is because both regulation policies increase the amount of synchronized buying and selling needed to achieve deleveraging which can destabilize the market none of these policies are optimal for everyone risk neutral investors prefer the unregulated case with low maximum leverage banks prefer the perfect hedge policy and fund managers prefer the unregulated case with high maximum leverage no one prefers basle ii

on an inventory model with deteriorating items and decreasing time varying demand and shortages in this paper we present an optimal procedure for finding the replenishment schedule for an inventory system with shortages in which items deteriorate at a constant rate and demand rates are decreasing over a known and finite planning horizon a numerical example is presented to illustrate the procedure

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines

dormancy as a strategic response to detrimental public policy organizations in democratic societies often encounter detrimental public policies that are later reversed through rather predictable political cycles the standard organizational responses to detrimental public policies examined in the literature include exiting the market altogether attempting to change the public policy through various political strategies or passively complying with the policy however these responses might not be suitable when a detrimental policy is likely to be reversed in this paper i consider organizational dormancy which entails a temporary reduction in an organization s level of activity as a viable alternative response i propose that some organizations might be able to undergo a period of strategic inactivity in response to the onset of a detrimental public policy and maintain this inactivity until a favorable public policy returns i also propose that such dormancy is rewarded when the favorable policy returns an investigation of a panel of private commercial banks in the indian banking industry from 1981 to 2004 lends support to this proposal

marketing production decisions in an industrial channel of distribution this paper presents a model that considers the interface between marketing and production decisions in a channel of distribution of industrial goods comprised of a manufacturer and a distributor the key issue investigated is the nature of the coordination within the channel in light of an unstable pattern of seasonal demand the investigation which focuses on dynamic issues considers production activities such as product delivery and inventory policy and their link to marketing strategies such as pricing policies the focus here is on the dynamic nature of the coordinational aspects of the various policies for example the following questions are addressed what is the distributor s pricing strategy throughout the season what is the nature of the contractual price in the channel under what conditions should the distributor carry no inventory throughout the seasonal period under what conditions should the manufacturer carry no inventory what is the impact of the seasonal parameters and differing h

optimal price and order size under partial backordering incorporating shortage backorder and lost sale costs abstract in this paper we consider the pricing and lot sizing problem for a product subject to general rate of deterioration and partial backordering we use impatience functions to model backlogging of demand we show that even when lost sale and backorder costs are present the problem is well posed in the reduced space we provide an iterative procedure for solving the overall problem we describe structural properties of the solution for the new model and comment on the recent work incorporating backorder cost we illustrate the solution procedure for the new model with examples

clearance pricing and inventory policies for retail chains clearance pricing and end of season inventory management are challenging and important problems in retailing sales rates depend upon price seasonal effects and the remaining assortment of items available to customers there is little time to react to observed sales and pricing errors result in either loss of potential revenue or excess inventory to be liquidated this paper develops optimal clearance prices and inventory management policies that take into account the impact of reduced assortment and seasonal changes on sales rates versions of these policies have been tested and implemented at three major retail chains and these applications are summarized and discussed

optimal dynamic pricing and ordering decisions for perishable products abstract in this paper we determine the order quantity and the prices for a perishable product with a multiple period lifetime demands for products of different ages are dependent on the prices of mutually substitutable products the problem for a product with lifetime of two periods is first analyzed and the stochastic dynamic programming model is developed given the inventory level for the old product product of age 2 the expected profit is a concave function of the order quantity the price of the new product product of age 1 and the discounted price of the old product product of age 2 the computational results show that the total profit significantly increases when demand transfers between products of different ages are considered for a product with lifetime of longer than two periods a heuristic based on the optimal solution for a single period problem is proposed for a multiple period problem

joint pricing and inventory control for non instantaneous deteriorating items with partial backlogging and time and price dependent demand abstract in this paper a joint pricing and inventory control for non instantaneous deteriorating items is developed we adopt a price and time dependent demand function shortages is allowed and partially backlogged the major objective is to determine the optimal selling price the optimal replenishment schedule and the optimal order quantity simultaneously such that the total profit is maximized we first show that for any given selling price optimal replenishment schedule exists and unique then we show that the total profit is a concave function of price next we present a simple algorithm to find the optimal solution finally we solve a numerical example to illustrate the solution procedure and the algorithm

order quantities for perishable inventory control with non stationary demand and a fill rate constraint abstract we study the practical decision problem of fresh food production with a long production lead time to decide every period e g week how many items to produce when a batch is ready for use its items have a fixed shelf life after which the items become waste in the sense that they cannot be sold anymore the demand for fresh food products is uncertain and highly fluctuating mainly caused by price promotions of retail organisations we focus on cases where a so called cycle fill rate service level requirement applies we investigate the generation of a production plan that fixes the timing and quantity of the production for a finite time horizon to minimise waste one issues the oldest items first i e a fifo issuing policy in case of out of stock sales are lost we model this decision problem as a stochastic programming sp model the objective of our study is to find order quantities for the sp model that approximately meet cycle fill rate service level requirements while keeping outdating low to find approximate solutions for the sp model an milp model is developed the milp model is a deterministic approximation that generates feasible replenishment quantities in less than a second with a scenario based minlp approach optimal solutions are generated for a large sample of demand paths as a benchmark for the milp solutions we show that the milp model is suitable for practical use if the setup cost is such that the replenishment cycles in the production plan are close to or of the same length as the maximum shelf life in those cases the expected total costs are close to the costs of the optimal solution and the average fill rate is close to the required one

winter is possibly not coming mitigating financial instability in an agent based model with interbank market abstract we develop a macroeconomic agent based model to study how financial instability can emerge from the co evolution of interbank and credit markets and the policy responses to mitigate its impact on the real economy the model is populated by heterogenous firms consumers and banks that locally interact in different markets in particular banks provide credit to firms according to a basel ii or iii macro prudential frameworks and manage their liquidity in the interbank market the central bank performs monetary policy according to different types of taylor rules we find that the model endogenously generates market freezes in the interbank market which interact with the financial accelerator possibly leading to firm bankruptcies banking crises and the emergence of deep downturns this requires the timely intervention of the central bank as a liquidity lender of last resort moreover we find that the joint adoption of a three mandate taylor rule tackling credit growth and the basel iii macro prudential framework is the best policy mix to stabilize financial and real economic dynamics however as the liquidity coverage ratio spurs financial instability by increasing the pro cyclicality of banks liquid reserves a new counter cyclical liquidity buffer should be added to basel iii to improve its performance further finally we find that the central bank can also dampen financial instability by employing a new unconventional monetary policy tool involving active management of the interest rate corridor in the interbank market

joint production and pricing decisions with setup costs and capacity constraints we consider the problem of setting prices and choosing production quantities for a single product over a finite horizon for a capacity constrained manufacturer facing price sensitive demands there is a fixed cost per production run and a variable cost per unit produced both of which may vary by period we characterize properties of the optimal solution considering cases with constant and time varying capacity and with and without speculative motive for holding inventory we show that counter to intuition optimal prices may increase as the capacity increases even when capacity is constant over the horizon we also show that increases in capacity do not always exhibit diminishing marginal returns our procedure produces solutions with much higher profits than can be obtained from a sophisticated sequential procedure in which a well informed and optimum seeking marketing department makes pricing decisions and the manufacturing department seeks to satisfy the resulting demands at minimum cost our results also suggest that firms with seasonal demand and tight capacity constraints should be more aggressive in setting prices to manage their demands than what is typically done in practice finally we discuss how a decision maker can use our procedure as an aid in solving multiproduct versions of the problem

a monopolistic and oligopolistic stochastic flow revenue management model this paper studies a one shot inventory replenishment problem with dynamic pricing the customer arrival rate is assumed to follow a geometric brownian motion homogeneous customers have an isoelastic demand function and do not behave strategically we find a closed form optimal pricing policy which utilizes current demand information under this pricing policy the inventory trajectory is deterministic and a retailer sells all inventory we show that dynamic pricing coordinated with the inventory decision achieves significantly higher profits than does static pricing furthermore under oligopolistic competition we establish a weak perfect bayesian equilibrium for the price and inventory replenishment game we find the pricing equilibrium to be cooperative even in a noncooperative environment but that inventory competition results in overstock and damages profits finally we examine the trade off between dynamic pricing and price precommitment and find that flexible pricing is still beneficial provided competition is not too intense

fiscal discipline and flexibility in emu the implementation of the stability and growth pact fiscal discipline to safeguard the credibility of the single monetary authority and fiscal flexibility to respond to country specific shocks are two core principles governing budgetary policy in emu the stability and growth pact aims at ensuring the first objective to comply with the requirements of the pact eu members need to achieve a close to balance or surplus position and change their budgetary behaviour in periods of cyclical upturns by refraining from spending the growth dividend past experience shows that fiscal laxity does not buy more effective stabilization once emu countries have achieved their medium term target their automatic stabilizers will be able to operate fully thus helping in smoothing out cyclical fluctuations the main potential problems in the implementation of the pact may arise in the early years of emu during the transition to a balanced budget in the event of a slow down in economic activity

inventory ordering policies of delayed deteriorating items under permissible delay in payments abstract the existing literature on inventory of deteriorating items considers deterioration to begin as soon as the items are stocked however there are several deteriorating items that do not start deteriorating immediately they are held in stock some farm produce like potatoes yams and even some fruits and vegetables have this property depletion of these items as soon as they are stocked will depend on demand and when deterioration begins it will depend on both demand and deterioration in this paper we develop a mathematical model on the inventory of deteriorating items that do not start deteriorating immediately they are stocked the model also takes into cognizance the fact that in business activities nowadays customers are given some allowed period within which to settle for the goods supplied to them they can use the accrued money from sales of the supplied goods to earn interest within the allowed period they are charged interest only when they fail to settle the amount they owe the supplier at the end of the allowed period

competitive strategies for two firms with asymmetric production cost structures we model joint production marketing strategies for two firms with asymmetric production cost structures in competition the first firm called the production smoother faces a convex production cost and a linear inventory holding cost the second firm called the order taker faces a linear production cost and holds no inventory each firm is assumed to vary continuously over time both its production rate and its price in view of an unstable surge pattern of demand the underlying theoretical motivation is to investigate the temporal nature of the equilibrium policies of two competing firms one operating at or near capacity the production smoother and one operating significantly below capacity the order taker we characterize and compare the equilibrium strategies of the two competing firms among our results we show that if the duopolistic production smoother finds it optimal to hold inventory then he will begin the season by building up inventory continue by drawing down inventory until i

coordinating clearance markdown sales of seasonal products in retail chains in this paper we propose a methodology to set prices of perishable items in the context of a retail chain with coordinated prices among its stores and compare its performance with actual practice in a real case study we formulate a stochastic dynamic programming problem and develop heuristic solutions that approximate optimal solutions satisfactorily to compare this methodology with current practices in the industry we conducted two sets of experiments using the expertise of a product manager of a large retail company in chile in the first case we contrast the performance of the proposed methodology with the revenues obtained during the 1995 autumn winter season in the second case we compare it with the performance of the experienced product manager in a simulation game setting in both cases our methodology provides significantly better results than those obtained by current practices

an elasticity approach to the newsvendor with price sensitive demand we introduce a measure of elasticity of stochastic demand called the elasticity of the lost sales rate which offers a unifying perspective on the well known newsvendor with pricing problem this new concept provides a framework to characterize structural results for coordinated and uncoordinated pricing and inventory strategies concavity and submodularity of the profit function as well as sensitivity properties of the optimal inventory and price policies are characterized by monotonicity conditions or bounds on the elasticity of the lost sales rate these elasticity conditions are satisfied by most relevant demand models in the marketing and operations literature our results unify and complement previous work on price setting newsvendor models and provide a new tool for researchers modeling stochastic price sensitive demand in other contexts

combined pricing and inventory control under uncertainty this paper addresses the simultaneous determination of pricing and inventory replenishment strategies in the face of demand uncertainty more specifically we analyze the following single item periodic review model demands in consecutive periods are independent but their distributions depend on the item s price in accordance with general stochastic demand functions the price charged in any given period can be specified dynamically as a function of the state of the system a replenishment order may be placed at the beginning of some or all of the periods stockouts are fully backlogged we address both finite and infinite horizon models with the objective of maximizing total expected discounted profit or its time average value assuming that prices can either be adjusted arbitrarily upward or downward or that they can only be decreased we characterize the structure of an optimal combined pricing and inventory strategy for all of the above types of models we also develop an efficient value iteration method to compute these optimal strategies finally we report on an extensive numerical study that characterizes various qualitative properties of the optimal strategies and corresponding optimal profit values

discounting and dynamic shelf life to reduce fresh food waste at retailers approximately 89 million of tonnes of food is wasted every year in the eu along the whole food supply chain the reasons for food waste by retailers include inappropriate quality control overstocking and inaccurate forecasting this study shows that food wasted by retailers can be reduced by discounting old products or by applying a dynamically adjustable expiration date in other words dynamic shelf life dsl we developed a simulation based optimization model to optimize the replenishment and discounting policy of a retailer who sells meat products dsl outperforms a fixed shelf life fsl in terms of profit waste shortages and food safety furthermore replenishment quantities can be higher the benefits of dsl are greater when demand is low or when the shelf life of products is short discounting is a successful strategy to reduce food waste for both fsl and dsl dsl without discounting is more effective than fsl with discounting combining dsl and discounting allows for a further reduction of food waste

an optimal replenishment policy for non instantaneous deteriorating items with stock dependent demand and partial backlogging abstract in this study we consider a problem of determining the optimal replenishment policy for non instantaneous deteriorating items with stock dependent demand in the model shortages are allowed and the backlogging rate is variable and dependent on the waiting time for the next replenishment the necessary and sufficient conditions of the existence and uniqueness of the optimal solution are shown as the special cases the results for the models with instantaneous or non instantaneous deterioration rate and with or without shortages are derived further we analytically identify the best circumstance among these special cases based on the minimum total relevant cost per unit time sensitivity analysis of the optimal solution with respect to major parameters is carried out finally four numerical examples are presented to demonstrate the developed model and the solution procedure

the impact of systemic and illiquidity risk on financing with risky collateral abstract repurchase agreements repos are one of the most important sources of funding liquidity for many financial investors and intermediaries in a repo some assets are given by a borrower as collateral in exchange of funding the capital given to the borrower is the market value of the collateral reduced by an amount termed as haircut or margin the haircut protects the capital lender from loss of value of the collateral contingent on the borrower s default for this reason the haircut is typically calculated with a simple value at risk estimation of the collateral for the purpose of preventing the risk associated to volatility however other risk factors should be included in the haircut and a severe undervaluation of them could result in a significant loss of value of the collateral if the borrower defaults in this paper we present a stylized model of the financial system which allows us to compute the haircut incorporating the liquidity risk of the collateral and most important possible systemic effects these are mainly due to the similarity of bank portfolios excessive leverage of financial institutions and illiquidity of assets the model is analytically solvable under some simplifying assumptions and robust to the relaxation of these assumptions as shown through monte carlo simulations we also show which are the most critical model parameters for the determination of haircuts

basel iii capital surcharges for g sibs are far less effective in managing systemic risk in comparison to network based systemic risk dependent financial transaction taxes in addition to constraining bilateral exposures of financial institutions there exist essentially two options for future financial regulation of systemic risk first regulation could attempt to reduce the financial fragility of global or domestic systemically important financial institutions g sibs or d sibs as for instance proposed by basel iii second it could focus on strengthening the financial system as a whole by reducing the probability of large scale cascading events this can be achieved by re shaping the topology of financial networks we use an agent based model of a financial system and the real economy to study and compare the consequences of these two options by conducting three computer experiments with the agent based model we find that re shaping financial networks is more effective and efficient than reducing financial fragility capital surcharges for g sibs could reduce systemic risk but they would have to be substantially larger than those specified in the current basel iii proposal in order to have a measurable impact this would cause a loss of efficiency

dynamic pricing in the presence of inventory considerations research overview current practices and future directions the benefits of dynamic pricing methods have long been known in industries such as airlines hotels and electric utilities where the capacity is fixed in the short term and perishable in recent years there has been an increasing adoption of dynamic pricing policies in retail and other industries where the sellers have the ability to store inventory three factors contributed to this phenomenon 1 the increased availability of demand data 2 the ease of changing prices due to new technologies and 3 the availability of decision support tools for analyzing demand data and for dynamic pricing this paper constitutes a review of the literature and current practices in dynamic pricing given its applicability in most markets and its increasing adoption in practice our focus is on dynamic intertemporal pricing in the presence of inventory considerations

optimal dynamic pricing and replenishment cycle for non instantaneous deterioration items with inventory level dependent demand abstract this paper considers a problem of determining the optimal dynamic pricing strategy and replenishment cycle for non instantaneous deteriorating items where the consumer demand depends on the sales price and the quantity of the items displayed in the store for the given replenishment cycle we derive the optimal dynamic pricing strategy by applying pontryagin s maximum principle and then design an effective algorithm to obtain the optimal dynamic pricing strategy and replenishment cycle simultaneously numerical examples are provided to illustrate the effectiveness of the proposed methods and solution procedure furthermore sensitivity analysis of the key system parameters is carried out and some interesting managerial insights are presented

optimal bundle formation and pricing of two products with limited stock abstract in this study we consider the stochastic modeling of a retail firm that sells two types of perishable products in a single period not only as independent items but also as a bundle our emphasis is on understanding the bundling practices on the inventory and pricing decisions of the firm one of the issues we address is to decide on the number of bundles to be formed from the initial product inventory levels and the price of the bundle to maximize the expected profit product demands follow a poisson process with a price dependent rate customer reservation prices are assumed to have a joint distribution we study the impact of reservation price distributions initial inventory levels product prices demand arrival rates and cost of bundling we observe that the expected profit decreases as the correlation between the reservation prices of two products increases with negative correlation bundling cost has a significant impact on the number of bundles formed when the product prices are low the retailer sells individual products as well as the bundle mixed bundling when they are high the retailer sells only bundles pure bundling the expected profit and the number of bundles offered decrease as the variance of the reservation price distribution increases for high starting inventory levels the retailer reduces bundle price and offers more bundles the number of bundle sales decreases and the number of individual product sales increases when the arrival rate increases since the need for bundling decreases impacts of substitutability and complementarity of products are also investigated the retailer forms more bundles or charges higher prices for the bundle or both as the products become more complementary and less substitutable

analysis and forecasting of demand during promotions for perishable items this study examines promotions for perishable products in a retail environment we analyze the impact of relative price discounts on product sales during a promotion and shed light on how to build models to forecast promotional demand for perishable products preliminary analyses based on regression models and a large dataset from a retailer do not reveal conclusive evidence for the presence of threshold and or saturation levels for price discounts for perishable products a potential explanation comes from the observation that although products like desserts on average allow 1 5 weeks time to consume their sales during promotions on average are equal to 14 weeks of regular sales this suggests that the success of a promotion is not so much determined by the restriction to stockpile due to the short time to consume but by the emergence of substitution effects consumers switching between different products of the same category we develop and test different models to forecast the demand during a promotion including a moving average forecast and several regression models within the class of regression models we find that modeling threshold and saturation effects leads to worse forecasting performance than modeling price reductions linearly or quadratically the largest improvements in forecast accuracy are gained by distinguishing between routine and non routine product categories routine categories with routine demand processes and a large number of observations perform best when applying a regression based on direct observations of the product category whilst non routine categories benefit from a regression which also uses observations from other product categories

the long and winding road towards fiscal decentralization este trabajo ofrece una explicacion teorica de las dificultades asociadas en un proceso de descentralizacion fiscal desde gobiernos nacionales a sub nacionales como es observado en numerosos paises en desarrollo un marco teorico de juegos es usado para m ostrar que la escasez del gobierno central de un compromiso tecnologico creible usado para penalizar el despilfarro fiscal de los gobiernos sub nacionales puede dar lugar a un nivel incompleto de descentralizacion fiscal dos diferentes conjuntos de equi librios son obtenidos en uno de ellos el gobierno central le conferira completa autonomia fiscal a los gobiernos sub nacionales mientras que en el otro el gobierno mantiene la autoridad fiscal ya que es optimo hacerlo en este caso la economia cae en un nivel ineficiente de descentralizacion fiscal medido en terminos de recaudacion de ingresos

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

coordinating inventory control and pricing strategies with random demand and fixed ordering cost the finite horizon case we analyze a finite horizon single product periodic review model in which pricing and production inventory decisions are made simultaneously demands in different periods are random variables that are independent of each other and their distributions depend on the product price pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered the objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon we show that when the demand model is additive the profit to go functions arek concave and hence an s s p policy is optimal in such a policy the period inventory is managed based on the classical s s policy and price is determined based on the inventory position at the beginning of each period for more general demand functions i e multiplicative plus additive functions we demonstrate that the profit to go function is not necessarilyk concave and an s s p policy is not necessarily optimal we introduce a new concept the symmetrick concave functions and apply it to provide a characterization of the optimal policy

the emperor has no clothes limits to risk modelling abstract this paper considers the properties of risk measures primarily value at risk var from both internal and external regulatory points of view it is argued that since market data is endogenous to market behavior statistical analysis made in times of stability does not provide much guidance in times of crisis in an extensive survey across data classes and risk models the empirical properties of current risk forecasting models are found to be lacking in robustness while being excessively volatile for regulatory use the var measure may give misleading information about risk and in some cases may actually increase both idiosyncratic and systemic risk

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

a multiproduct dynamic pricing problem and its applications to network yield management a firm has inventories of a set of components that are used to produce a set of products there is a finite horizon over which the firm can sell its products demand for each product is a stochastic point process with an intensity that is a function of the vector of prices for the products and the time at which these prices are offered the problem is to price the finished products so as to maximize total expected revenue over the finite sales horizon an upper bound on the optimal expected revenue is established by analyzing a deterministic version of the problem the solution to the deterministic problem suggests two heuristics for the stochastic problem that are shown to be asymptotically optimal as the expected sales volume tends to infinity several applications of the model to network yield management are given numerical examples illustrate both the range of problems that can be modeled under this framework and the effectiveness of the proposed heuristics the results provide several fundamental insights into the performance of yield management systems

to bail out or to bail in answers from an agent based model since the beginning of the 2008 financial crisis almost half a trillion euros have been spent to financially assist eu member states in taxpayer funded bail outs these crisis resolutions are often accompanied by austerity programs causing political and social friction on both domestic and international levels the question of how to resolve failing financial institutions and how this depends on economic preconditions is therefore a pressing and controversial issue of vast political importance in this work we employ an agent based model to study the economic and financial ramifications of three highly relevant crisis resolution mechanisms to establish the validity of the model we show that it reproduces a series of key stylized facts of the financial and real economy the distressed institution can either be closed via a purchase assumption transaction it can be bailed out using taxpayer money or it may be bailed in in a debt to equity conversion we find that for an economy characterized by low unemployment and high productivity the optimal crisis resolution with respect to financial stability and economic productivity is to close the distressed institution for economies in recession with high unemployment the bail in tool provides the most efficient crisis resolution mechanism under no circumstances do taxpayer funded bail out schemes outperform bail ins with private sector involvement

when panic makes you blind a chaotic route to systemic risk abstract we present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems building on corsi et al 2016 we model a set of financial institutions having value at risk capital requirements and investing in a portfolio of risky assets whose prices evolve stochastically in time and are endogenously driven by the trading decisions of financial institutions assuming that they use adaptive expectations of risk we show that the evolution of the system is described by a slow fast random dynamical system which can be studied analytically in some regimes the model shows how the risk expectations play a central role in determining the systemic stability of the financial system and how wrong risk expectations may create panic induced reduction or over optimistic expansion of balance sheets specifically when investors are myopic in estimating the risk the fixed point equilibrium of the system breaks into leverage cycles and financial variables display a bifurcation cascade eventually leading to chaos we discuss the role of financial policy and the effects of some market frictions as the cost of diversification and financial transaction taxes in determining the stability of the system in the presence of adaptive expectations of risk

the impact of dynamic pricing on the economic order decision this paper analyzes the impact of dynamic pricing on the single product economic order decision of a monopolist retailer items are procured from an external supplier according to the economic order quantity eoq model and are sold to customers on a single market without competition following the simple monopolist pricing problem coordinated decision making of optimal pricing and ordering is influenced by operating costs including ordering and inventory holding costs and the demand rate obtained from a price response function the retailer is allowed to vary the selling price either in a fixed number of discrete points in time or continuously while constant and continuous pricing have received much attention in the literature problems with a limited number of price changes are rather rare this paper illustrates the benefit of dynamically changing prices to achieve operational efficiency in the eoq model that is to trigger high demand rates when inventories are high we provide structural properties of the optimal time instants when the price should be changed taking into account costs for changes in price it provides numerical guidance on number timing and size of price changes during an order cycle numerical examples show that the benefits of dynamic pricing in an eoq framework can be achieved with only a few price changes and that products being unprofitable under static pricing may become profitable under dynamic pricing

a survey of deterministic models for the eoq and epq with partial backordering models for the basic deterministic eoq or epq problem with partial backordering or backlogging make all the assumptions of the classic eoq or epq model with full backordering except that only a fraction of the demand during the stockout period is backordered in this survey we review deterministic models that have been developed over the past 40 years that address the basic models and extensions that add other considerations such as pricing perishable or deteriorating inventory time varying or stock dependent demand quantity discounts or multiple warehouses

optimal inventory policy for a perishable item with demand function sensitive to price and time abstract we formulate a model for determining the optimal pricing order quantity and replenishment period for perishable items with price dependent and time dependent demand the items have a fixed shelf life and the demand rate decreases linearly in the selling price and polynomially over the time after replenishment until it vanishes either at the reservation price or at expiration time we prove that the three variable profit maximization problem can be reduced into a single variable problem in which the variable is the duration of the replenishment period we show that the profit function is strictly pseudo concave and provide means of obtaining the optimal policy three numerical examples are presented to demonstrate the model accompanied by a sensitivity analysis

supermarket competition the case of every day low pricing every day low pricing edlp strategy has proved to be a successful innovation resulting in higher profits to supermarkets adopting it in competition with promotional pricing promo conventional wisdom attributes this success either to lower costs or to edlp better serving time constrained consumers while discouraging cherry pickers who seek promotions however it is unclear that such cost savings are being fully realized since edlp stores also engage in price promotions also continued existence of promo stores means that costs are not the only factor and they compete effectively without relying just on the cherry pickers furthermore experimental evidence suggests that a supermarket cannot obtain higher profits by merely setting constant low prices leading to the question exactly what makes edlp successful this question is of particular relevance to both academics and practitioners who have been intrigued by the success of this retailing strategy more generally the retailing issues addressed in this paper the economic analysis of competition and the empirical findings should be of interest to the broader community of researchers and managers we investigate the factors contributing to edlp s success by analyzing the competition between supermarkets through a game theoretic analysis of a market consisting of both time constrained consumers and cherry pickers key features of our model are consumers shop and purchase a basket of goods based on price announcements by stores and rational expectations of unannounced prices stores carry more than one good and compete through prices service convenience and appropriate communication strategies and no exogenous cost asymmetries we derive the conditions under which retailers choosing different strategies edlp and promo is a perfect nash equilibrium our analysis shows that the edlp store s offering of constant every day low prices is an equilibrium outcome endogenously determined successful implementation of the edlp strategy involves communication of relative basket prices implying that merely setting constant low prices is not viable we further demonstrate that while time constrained consumers find every day low prices at edlp attractive and cherry pickers the promotions at promo clientele effects are in fact more complicated specifically in equilibrium the promo store offers a higher service level as desired by time constrained consumers and the edlp store a lower service level in keeping with the needs of cherry pickers this choice of service by the two stores results in a cleaner segmentation of the market the higher relative basket price and service at the promo store results in a larger base of time constrained consumers to shop at the promo store and a larger base of cherry pickers to shop at the edlp store even though some cherry pickers continue to visit the promo store to avail of the price specials in this way our results contradict the conventional wisdom on edlp strategy as being mainly geared towards time constrained consumers finally industry profits are higher in an edlp promo equilibrium than when stores adopt identical strategies our analysis and results also offer a more complete characterization of the edlp and promo strategies indeed we show that edlp and promo strategies are positioning strategies rather than merely pricing strategies with different elements price promotions service and communications while the edlp store uses basket prices to attract both segments the promo store uses service and price specials to compete in the time constrained and cherry picking segment respectively given these different approaches of the two stores the communication strategies of the edlp and the promo stores emphasize these differences as well in this way we show as suggested by corstjens and corstjens 1994 that positioning in a retail context involves developing multidimensional strategies appealing to all segments while each element of the strategy may focus on a different consumer segment this is in contrast to the traditional view of segmentation in which different products in a product line for example are designed to appeal to different segments we complete the analysis by examining the data from the trade press and a survey conducted in a major metropolitan area these data while limited in scope support our theoretical results

pricing and manufacturing decisions when demand is a function of prices in multiple periods in most deterministic manufacturing decision models demand is either known or induced by pricing decisions in the period that the demand is experienced however in more realistic market scenarios consumers make purchase decisions with respect to price not only in the current period but also in past and future periods we model a joint manufacturing pricing decision problem accounting for that portion of demand realized in each period that is induced by the interaction of pricing decisions in the current period and in previous periods we formulate a mathematical programming model and develop solution techniques we identify structural properties of our models and develop closed form solutions and effective heuristics for various special cases of our models finally we conduct extensive computational experiments to quantify the effectiveness of our heuristics and to develop managerial insights

dynamic version of the economic lot size model this article originally appeared in management science october 1958 volume 5 number 1 pp 89 96 published by the institute of management sciences a forward algorithm for a solution to the following dynamic version of the economic lot size model is given allowing the possibility of demands for a single item inventory holding charges and setup costs to vary over n periods we desire a minimum total cost inventory management scheme which satisfies known demand in every period disjoint planning horizons are shown to be possible which eliminate the necessity of having data for the full n periods

optimal pricing and lot sizing under conditions of perishability and partial backordering we formulate a generalized model of dynamic pricing and lot sizing by a reseller who sells a perishable good we assume that when it is economic to backlog demand the reseller can plan for periods of shortage during which demand can be partially backordered when the good is highly perishable the reseller may need to backlog demand in order to market the good at a reasonable price we present a simple solution procedure for solving the optimization problem the procedure entails solving first a single nonlinear equation and then if required two nonlinear equations

dynamic pricing and warranty policies for products with fixed lifetime abstract we consider a repairable product with known market entry and departure times a warranty policy is offered with product purchase under which a customer can have a failed item repaired free of charge in the warranty period it is assumed that customers are heterogeneous in their risk attitudes toward uncertain repair costs incurred after the warranty expires the objective is to determine a joint dynamic pricing and warranty policy for the lifetime of the product which maximizes the manufacturer s expected profit in the first part of the analysis we consider a linearly decreasing price function and a constant warranty length we first study customers purchase patterns under several different pricing strategies by the manufacturer and then discuss the optimal pricing and warranty strategy in the second part we assume that the warranty length can be altered once during the product lifetime in developing a joint pricing and warranty policy numerical studies show that a dynamic warranty policy can significantly outperform a fixed length warranty policy

optimal replenishment policies for non instantaneous deteriorating items with stock dependent demand abstract wu et al 2006 an optimal replenishment policy for non instantaneous deteriorating items with stock dependent demand and partial backlogging international journal of production economics 101 369 384 established an inventory model for non instantaneous deteriorating items with stock dependent demand and obtained the optimal replenishment policy in this paper we first amend wu et al s model by changing the objective to maximizing the total profit secondly we set a maximum inventory level in the model to reflect the facts that most retail outlets have limited shelf space thirdly we relax the restriction of zero ending inventory when shortages are not desirable we then establish the theoretical results and provide an algorithm to find the optimal solution finally we present some numerical examples to illustrate the results

approximations for the relative outdating of perishable products by combining stochastic modeling simulation and regression modeling abstract in this paper we derive approximations for the expected amount of outdating waste in an inventory system with perishable products periodic review positive lead time fixed case pack sizes and a first in first out withdrawal policy demand is discrete and stochastic demand which is not met from inventory on hand will be lost the approximations can be used to evaluate how the amount of outdating can be reduced by changing the safety stock and or the product and demand characteristics we first derive approximations in an analytical way and then use regression to improve these approximations the final approximation is very fast and performs very well the mean and standard deviation of the approximation error are equal to 0 01 and 0 78 moreover the approximation is applicable in situations with parameter settings which are frequently encountered in practice and for which no other approximations have been derived in the literature before

optimal order quantity and pricing decisions in single period inventory systems abstract in this paper we consider simultaneous pricing and procurement decisions associated with a one period pure inventory model under deterministic or probabilistic demand we investigate the necessary and sufficient conditions for an type policy to be optimal for the determination of the procurement quantity we also show how the corresponding optimal price can be obtained

dynamic pricing and ordering decisions by a monopolist this paper considers the relationship between pricing and ordering decisions for a monopolistic retailer facing a known demand function where over the inventory cycle the product may exhibit i physical decay or deterioration of inventory called wastage and ii decrease in market value called value drop associated with each unit of inventory on hand the retailer is allowed to continuously vary the selling price of the product over the cycle we introduce a notion of instantaneous margin and use it to derive profit maximizing conditions for the retailer the model explains the markdown of retail goods subject to decay it also provides guidance in determining when price changes during the cycle are worthwhile due to product aging how often such changes should be made and how such changes affect ordering intervals and quantities