An integrated revenue management framework for a firm’s greening, pricing and inventory decisions

Syed Asif Raza, Sivakumar Rathinam, Mihaela Turiac and Laoucine Kerbache

International Journal of Production Economics, 2018, vol. 195, issue C, 373-390

Abstract: There is a growing interest on developing efficient ways of incorporating environmental considerations into business practices in order to meet both consumers’ demand for green products/services, and the firms’ sustainable profitability. The main contribution of this article is in developing an integrated revenue management framework to address a firm’s greening (investment) effort, pricing and inventory decisions. It is assumed that the firm inaugurates a green product along with its existing product. Even though the firm offers both the green and regular product at differentiated prices, the market segmentation as a result of this price differentiation is regarded as imperfect. This imperfect market segmentation causes a demand leakage mainly due to the heterogeneity among the customers’ willingness-to-pay. These effects are included in our proposed model and simplified analytical solutions are developed to solve the same. Additional scenarios where a firm experiences a price-dependent stochastic demand with an unknown distribution is also modeled. This scenario is addressed using a distribution-free approach based on Scarf’ s rule. The performance of the proposed methods and the significance of the modeling framework are finally corroborated through several simulations. This analysis provides a sustainable environment, production and retailing framework while still augmenting profitability using fundamental tools from revenue management.

Keywords: Environment; Newsvendor problem; Pricing; Market segmentation; Distribution-free approach (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:195:y:2018:i:c:p:373-390

DOI: 10.1016/j.ijpe.2016.11.014

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