Market segmentation, advanced demand information, and supply chain performance

Market segmentation, advanced demand information, and supply chain performance

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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:
Keywords: supply chain
Abstract:

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.

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