Integrated inventory models considering the two-level trade credit policy and a price-negotiation scheme

Liang-Hsuan Chen, Fu Sen Kang

Research output: Contribution to journalArticle

59 Citations (Scopus)


This paper develops the integrated inventory models with permissible delay in payment, in which customers' demand is sensitive to the buyer's price. The models consider the two-level trade credit policy in the vendor-buyer and buyer-customer relationships in supply chain management. A simple recursive solution procedure is proposed for the integrated models to determine the buyer's optimal pricing and production/order strategy. Although the total profit from the buyer and vendor increases together, the buyer's share lessens. To compensate the buyer's loss due to the cooperative relationship, a negotiation system is presented in order to allocate the profit increase to the vendor and buyer to determine the pricing and production/order strategy. A numerical example and sensitivity analysis are provided to illustrate the proposed model. The results indicate that the total profit from the buyer and vendor together can increase, although a price discount is given to the buyer in the proposed models.

Original languageEnglish
Pages (from-to)47-58
Number of pages12
JournalEuropean Journal of Operational Research
Issue number1
Publication statusPublished - 2010 Aug 16


All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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