Collaborative pricing and replenishment policy for hi-tech industry

P C Yang (), H M Wee and J C P Yu
Additional contact information
P C Yang: St John's University
H M Wee: Chung Yuan Christian University
J C P Yu: Takming College

Journal of the Operational Research Society, 2007, vol. 58, issue 7, 894-900

Abstract: Abstract Owing to rapid technological innovation and severe competition, the upstream component price and the downstream product cost of hi-tech industries like computers and communication consumer's products usually decline significantly with time. From a practical viewpoint, there is a need to develop a collaborative pricing and replenishing model with finite horizon when the vendor's purchase cost and the end-consumer's market price are reduced simultaneously. To entice collaboration, the vendor may offer some price discount to the buyer using a negotiation factor to balance the net profit for each player. A numerical example and sensitivity analysis are carried out to illustrate the model. Our results indicate that higher decline-rate in the vendor's purchase cost leads to a smaller vendor lot size, and the higher decline-rate in the market price leads to a larger buyer lot size. The percentage increase in the net profit is approximately 6.57% when cost/price reduction is considered. Therefore, it is significant to consider the effect of the cost/price reduction, especially in hi-tech industries.

Keywords: collaborative system; pricing and replenishing; cost and price reduction (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (9)

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DOI: 10.1057/palgrave.jors.2602196

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