Coordinating ordering and pricing decisions in a two-stage distribution system

Yu Te Liu, Wei Ming Wang, Chung-Chi Hsieh

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

We consider a particular model of short-term discounting that 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. Our analysis reveals that, in the presence of homogeneous retailers, the distributor's profit percentage increase due to coordination generally is decreasing in the number of retailers and in the inventory holding cost rate. Although an increase of 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 in the presence of heterogeneous retailers that offering a discounted price benefits the distributor when both the inventory holding cost rate and the variation of demand are small or large.

Original languageEnglish
Title of host publicationProceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09
Pages438-443
Number of pages6
DOIs
Publication statusPublished - 2009 Nov 16
Event2009 6th International Conference on Service Systems and Service Management, ICSSSM '09 - Xiamen, China
Duration: 2009 Jun 82009 Jun 10

Publication series

NameProceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09

Other

Other2009 6th International Conference on Service Systems and Service Management, ICSSSM '09
CountryChina
CityXiamen
Period09-06-0809-06-10

All Science Journal Classification (ASJC) codes

  • Information Systems
  • Information Systems and Management

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  • Cite this

    Liu, Y. T., Wang, W. M., & Hsieh, C-C. (2009). Coordinating ordering and pricing decisions in a two-stage distribution system. In Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09 (pp. 438-443). [5174923] (Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09). https://doi.org/10.1109/ICSSSM.2009.5174923