Journal
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 180, Issue 2, Pages 585-600Publisher
ELSEVIER
DOI: 10.1016/j.ejor.2006.04.011
Keywords
pricing; inventory; supply chain management
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This paper presents a practical approach for designing a quantity-discount (qd) scheme for a manufacturer who supplies a newsvendor-type product to a large number of heterogeneous retailers. The main components of our approach are: (i) an information structure for handling a large number of heterogeneous retailers with changing identities; and (ii) expected-profit expressions for any given qd scheme. We show that these expected-profit expressions can be easily optimized to produce attractive qd schemes; also, these schemes are shown to be quite robust against errors in parameter estimation. As a significant by-product, our multi-retailer scenario provides a more meaningful framework for designing manufacturer-perspective qd schemes, since we also show in this paper that a single-retailer scenario leads to a degenerate problem. (c) 2006 Elsevier B.V. All rights reserved.
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