Note---Comment on: A Generalized Quantity Discount Pricing Model to Increase Supplier's Profits

S. K. Goyal
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S. K. Goyal: Department of Decision Sciences and Management Information Systems, Concordia University, Montreal, Quebec H3G 1M8, Canada

Management Science, 1987, vol. 33, issue 12, 1635-1636

Abstract: Lee and Rosenblatt (Lee, H. L., M. J. Rosenblatt. 1986. A generalized quantity discount pricing model to increase supplier's profits. Management Sci. 32 (9) 1177--1185.) considered the joint problem of ordering and offering discount by a supplier to his sole buyer, the objective of the supplier being to induce the buyer to alter his order quantities in order to increase the supplier's yearly profit. They determined the optimal ordering and pricing policy for the supplier under the constraint on the amount of discount offered to the purchaser. This restriction on the amount of price discount seems unreasonable when the objective of the supplier, in all likelihood, is to increase his own profits. It is possible that higher discounts in purchase price may lead to greater economies for the supplier. In this note, a much simpler approach is being offered for determining the optimal ordering and pricing policy for the supplier.

Date: 1987
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