Article ID: | iaor200234 |
Country: | United States |
Volume: | 3 |
Issue: | 1 |
Start Page Number: | 53 |
End Page Number: | 67 |
Publication Date: | Jan 2001 |
Journal: | Manufacturing & Service Operations Management |
Authors: | Chen Fangruo |
Keywords: | supply chain |
A monopolist sells a single product to a market where the customers may be enticed to accept a delay as to when their orders are shipped. The enticement is a discounted price for the product. The market consists of several segments with different degrees of aversion to delays. The firm offers a price schedule under which the customers each self-select the price they pay and when their orders are to be shipped. When a customer agrees to wait, the firm gains advanced demand information that can be used to reduce its supply chain costs. This article shows how an optimal pricing-replenishment strategy that balances the costs due to discounted prices and the benefits due to advanced demand information can be determined.