Dynamic Slotting and Pricing Decisions in a Durable Product Supply Chain

X. He and Suresh Sethi
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X. He: University of Texas at Dallas

Journal of Optimization Theory and Applications, 2008, vol. 137, issue 2, No 7, 363-379

Abstract: Abstract We consider a supply chain in which a manufacturer sells an innovative durable product to an independent retailer over its life cycle. We assume that the product demand follows a Bass-type diffusion process and that it is determined by the market influences, retail price of the product, and shelf space allocated to it. We consider the following retailer profit optimization strategies: (i) the myopic strategy of maximizing the current-period profit and (ii) the far-sighted strategy of maximizing the life-cycle profit. We characterize the optimal dynamic shelf-space allocation and retail pricing policies for the retailer and wholesale pricing policies for the manufacturer. We compute also these policies numerically. Surprisingly, we find that the manufacturer, and sometimes even the retailer, is better off with a myopic retailer strategy in some cases.

Keywords: Stackelberg differential games; Bass model; Pricing; Slotting; Supply chain management (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10957-007-9330-x

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