Retailer shelf-space management with trade allowance: A Stackelberg game between retailer and manufacturers

Yu-Chung Tsao, Jye-Chyi Lu, Na An, Faiz Al-Khayyal, Richard W. Lu and Guanghua Han

International Journal of Production Economics, 2014, vol. 148, issue C, 133-144

Abstract: Motivated by the significant influence of trade allowance on store operation and the efficiency of shelf-space allocation, this article develops a model for optimizing category-level shelf-space management. A category shelf-space allocation framework with trade allowance is presented and a multi-player Retailer Stackelberg game is introduced to model the interaction between retailer and manufacturers. With this framework, a retailer maximizes profit by taking the manufacturers' trade allowance response into account, which provides a realistic approach of simultaneously determining the shelf-space and trade promotion decisions under the consideration of interactions among products. A piecewise linearization method is employed to reformulate the Mixed Integer Nonlinear Programming (MINLP) problem into a linear MIP problem for optimal solutions. Numerical examples demonstrate significant advantage of the proposed framework and quantitative analysis leads to a variety of managerial insights.

Keywords: Optimization; Promotion; Statistical modeling. (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:148:y:2014:i:c:p:133-144

DOI: 10.1016/j.ijpe.2013.09.018

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