Coordination in vendor-buyer inventory systems: on price discounts, Stackelberg game and joint optimisation

S. Viswanathan

International Journal of Operational Research, 2009, vol. 6, issue 1, 110-124

Abstract: We consider a version of the Stackelberg game that is used to model discount pricing decisions in vendor-buyer supply chains. The game consists of a leader who is selling a product to one (or more) follower(s) who in turn sell it to the ultimate consumers. We define conditional strategy for the leader as a strategy where the transfer price offered by the leader is conditional upon the specific decision taken by the follower. We show that the leader's optimal conditional strategy can achieve perfect coordination. We then discuss the application of the result to specific models for discount pricing decisions in vendor-buyer inventory systems and interpret its implications for these models.

Keywords: vendor-buyer inventory systems; coordination; Stackelberg game; quantity discounts; volume discounts; joint optimisation; discount pricing. (search for similar items in EconPapers)
Date: 2009
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