Two-period pricing and ordering policy with price-sensitive uncertain demand

Abstract

Demand for the products change with the time and thus production, promotion, pricing, etc. should be adopted at the time. In general, it is true for many hi-tech consumer products such as PCs, Mobiles, TVs and phones where demand is low and prices are high in the beginning and demand pick-up with a possible price drop in the growth face. In this work, we consider such a supply chain where the retailer sales a product over two selling periods with price-sensitive stochastic demands. Two types of models are proposed. Basic models are based on wholesale price contract. To improve the channel efficiency, we address the return policy. We show that the return policy is not always a win-win policy and cannot improve the whole channel efficiency in all cases. Finally, we carry out a comprehensive computational analysis to draw key insights of our models from the managerial point of view.

Keywords:

• Supply chain management
• price-sensitive stochastic demand
• declining price
• lost sale
• coordinating contract

Acknowledgements

The authors would like to thank the financial support by Natural Sciences and Engineering Research Council Of Canada (NSERC) under Grant No: 1092 and UGC Minor Research Project (MRP) under Memo No: PSW-031/11-12. The authors would also like to thank anonymous reviewers for their constructive comments that improve the contents of this paper greatly.

Notes

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Natural Sciences and Engineering Research Council Of Canada (NSERC) [grant number 1092] and UGC Minor Research Project (MRP) [grant number PSW-031/11-12].