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

Fingerprint

Profitability
Costs
Distribution system
Pricing decisions
Retailers
Distributor
Profit

All Science Journal Classification (ASJC) codes

  • Information Systems
  • Information Systems and Management

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
Liu, Yu Te ; Wang, Wei Ming ; Hsieh, Chung-Chi. / Coordinating ordering and pricing decisions in a two-stage distribution system. Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09. 2009. pp. 438-443 (Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09).
@inproceedings{8c2d6abe74db497383f604feb1a50b56,
title = "Coordinating ordering and pricing decisions in a two-stage distribution system",
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.",
author = "Liu, {Yu Te} and Wang, {Wei Ming} and Chung-Chi Hsieh",
year = "2009",
month = "11",
day = "16",
doi = "10.1109/ICSSSM.2009.5174923",
language = "English",
isbn = "9781424436620",
series = "Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09",
pages = "438--443",
booktitle = "Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09",

}

Liu, YT, Wang, WM & 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., 5174923, Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09, pp. 438-443, 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09, Xiamen, China, 09-06-08. https://doi.org/10.1109/ICSSSM.2009.5174923

Coordinating ordering and pricing decisions in a two-stage distribution system. / Liu, Yu Te; Wang, Wei Ming; Hsieh, Chung-Chi.

Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09. 2009. p. 438-443 5174923 (Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09).

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

TY - GEN

T1 - Coordinating ordering and pricing decisions in a two-stage distribution system

AU - Liu, Yu Te

AU - Wang, Wei Ming

AU - Hsieh, Chung-Chi

PY - 2009/11/16

Y1 - 2009/11/16

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=71049157933&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=71049157933&partnerID=8YFLogxK

U2 - 10.1109/ICSSSM.2009.5174923

DO - 10.1109/ICSSSM.2009.5174923

M3 - Conference contribution

SN - 9781424436620

T3 - Proceedings of the 2009 6th International Conference on Service Systems and Service Management, ICSSSM '09

SP - 438

EP - 443

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

ER -

Liu YT, Wang WM, Hsieh C-C. 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. 2009. p. 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