Managing product variety with advance selling and capacity restrictions

Thyagaraj S. Kuthambalayan, Peeyush Mehta and Kripa Shanker

International Journal of Production Economics, 2015, vol. 170, issue PA, 287-296

Abstract: In this research we analyze the impact of advance selling with price discount on a firms׳ ability to maximize the expected profit. The production environment of the firm is characterized by short selling cycle, multiple products, demand variability, and capacity restrictions. The advance orders are randomly distributed with the parameters dependent on the discount levels under advance selling. The advance orders are used to update the demand forecast of selling season, and are delivered at the start of the selling season. The problem is modeled as a three-stage, stochastic non-linear programming problem. We derive the concavity of the problem under customers willingness to buy in advance. Our solution methodology comprises the variance reduction technique of ‘Antithetic Variates’ that gives credible value of price discount levels for different sets of demand values. We also provide sensitivity analysis of the problem parameters to derive insights into the behavior of the expected profit, and the benefits due to advance selling under capacity restrictions.

Keywords: Advance selling; Capacitated newsvendor; Product variety (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527315003874
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:170:y:2015:i:pa:p:287-296

DOI: 10.1016/j.ijpe.2015.10.006

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().