|Start Page Number:||1435|
|End Page Number:||1462|
|Publication Date:||Nov 2017|
|Journal:||International Transactions in Operational Research|
|Keywords:||marketing, supply & supply chains, decision, combinatorial optimization, optimization, game theory, demand, simulation|
In this paper, we investigate how a retailer facing the newsvendor situation with a supplier take‐it‐or‐leave‐it offer can identify the dominant strategy. In our newsvendor setting, (a) the supplier, as the dominant player, imposes a take‐it‐or‐leave‐it offer with quantity discounts; (b) the retailer, as the dominated player who also has her own discount scheme for customers to promote sales, should then determine whether she accepts the supplier's offer; and (c) neither player has complete information about the probability distribution of demand. By examining only the price schedules of both players, we establish the conditions under which the retailer can safely accept the take‐it‐or‐leave‐it offer such that the strategy to abandon her own discount policy in favor of the quantity discounts offered by the supplier dominates the strategy to continue her own discount policy without the quantity discounts offered by the supplier.