Optimal dynamic production and sales plans for a new product in the presence of scarcity effects

Rahul Patil and Janat Shah

International Journal of Operational Research, 2016, vol. 27, issue 4, 610-623

Abstract: This paper develops an integrated production and sales planning model for a firm that wants to sell a new product with a fixed market potential under a supply constraint. We consider a situation where a new product diffusion process depends on the word of mouth effects of waiting applicants in addition to adopters and innovators. This allows us to represent scarcity effects and its consequences, hype and retarding effects. Some practitioners argue that firms intentionally delay sales to earn more profits. We identify situations where a strategic sales delay can be optimal. In contrast, under the retarding effect, a build up plan becomes dominant. Moreover, we find that the length of the build-up period is not constant and depends on the magnitude of the retarding effect. Finally, we investigate the capacity implications of scarcity.

Keywords: sales planning; new products; marketing-manufacturing interface; control theory; production planning; capacity planning; scarcity effects; new product diffusion; word of mouth; WoM; strategic sales delay. (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijores:v:27:y:2016:i:4:p:610-623

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