Joint pricing and inventory decision under a probabilistic selling strategy

Yifan Wu () and Shibo Jin
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Yifan Wu: East China University of Science and Technology
Shibo Jin: East China University of Science and Technology

Operational Research, 2022, vol. 22, issue 2, No 13, 1209-1233

Abstract: Abstract This study examines whether probabilistic selling could enhance inventory management considering market size uncertainty in a rather general setting. We propose to study the impact of probabilistic selling on the profit, price and order quantity within a newsvendor framework. By comparing probabilistic selling against traditional selling, we find that probabilistic selling could generally increase firm’s expected profit. Moreover, the firm will increase the price and the order quantity for the component product. The impact of various aspects, i.e. the demand variance, the unit cost and the degree of cannibalization, on the pricing and order decisions are investigated through numerical experiments.

Keywords: Probabilistic selling; Newsvendor; Pricing; Inventory (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s12351-020-00599-x

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