Price-setting newsvendor with strategic consumers

We consider a newsvendor who sells a single product over a single season with the objective of determining both the selling price and stock quantity to maximize the expected profit. The customers are strategic and we consider two demand cases: additive and multiplicative. For each case, we derive the newsvendor׳s optimal decisions and demonstrate that neglecting the price-sensitivity of demand leads the newsvendor to make sub-optimal decisions. Moreover, we show that under certain conditions, strategic consumer behavior may positively affect the newsvendor׳s optimal expected profit in the additive demand case.

[1]  M. Khouja.  The single-period (news-vendor) problem: literature review and suggestions for future research , 1999 .

[2]  Maqbool Dada,et al.  Pricing and the Newsvendor Problem: A Review with Extensions , 1999, Oper. Res..

[3]  Shanling Li,et al.  Structural Properties of Buyback Contracts for Price-Setting Newsvendors , 2008, Manuf. Serv. Oper. Manag..

[4]  Gérard P. Cachon,et al.  The Value of Fast Fashion: Quick Response, Enhanced Design, and Strategic Consumer Behavior , 2011, Manag. Sci..

[5]  Hau L. Lee,et al.  The Impact of the Secondary Market on the Supply Chain , 2002, Manag. Sci..

[6]  Senthil K. Veeraraghavan,et al.  Selling to Conspicuous Consumers: Pricing, Production, and Sourcing Decisions , 2012, Manag. Sci..

[7]  Xuanming Su,et al.  On the Value of Commitment and Availability Guarantees when Selling to Strategic Consumers , 2008, Manag. Sci..

[8]  David Simchi-Levi,et al.  On the Unimodality of the Profit Function of the Pricing Newsvendor , 2013 .

[9]  Daniel Granot,et al.  On the effectiveness of returns policies in the price‐dependent newsvendor model , 2005 .

[10]  Ershi Qi,et al.  Quick response and supply chain structure with strategic consumers , 2015 .

[11]  Serguei Netessine,et al.  Revenue Management with Strategic Customers: Last-Minute Selling and Opaque Selling , 2010, Manag. Sci..

[12]  Qing Li,et al.  Coordinating Replenishment and Pricing in a Firm , 2002, Manuf. Serv. Oper. Manag..

[13]  Alexandar Angelus,et al.  A Multiechelon Inventory Problem with Secondary Market Sales , 2011, Manag. Sci..

[14]  Robert Swinney,et al.  Inventory Pooling with Strategic Consumers : Operational and Behavioral Benefits , 2011 .

[15]  Xuanming Su,et al.  Consumer Returns Policies and Supply Chain Performance , 2008, Manuf. Serv. Oper. Manag..

[16]  Gérard P. Cachon,et al.  Purchasing, Pricing, and Quick Response in the Presence of Strategic Consumers , 2009, Manag. Sci..

[17]  Dilip Chhajed,et al.  Vertical Integration with Price-Setting Competitive Newsvendors , 2007, Decis. Sci..

[18]  Robert Swinney,et al.  Selling to Strategic Consumers When Product Value Is Uncertain: The Value of Matching Supply and Demand , 2011, Manag. Sci..

[19]  Ye Lu,et al.  The Effect of Supply Uncertainty in Price-Setting Newsvendor Models , 2013, Eur. J. Oper. Res..

[20]  Justin P. Johnson.  Secondary markets with changing preferences , 2011 .

[22]  Tak Kuen Siu,et al.  Impact of secondary market on consumer return policies and supply chain coordination , 2014 .

[23]  Yuwen Chen,et al.  The newsvendor problem: Review and directions for future research , 2011, Eur. J. Oper. Res..

[24]  Peter Kischka,et al.  The price-setting newsvendor with service and loss constraints , 2013 .

[25]  Daniel Granot,et al.  Price and Order Postponement in a Decentralized Newsvendor Model with Multiplicative and Price-Dependent Demand , 2008, Oper. Res..

[26]  Li Yao,et al.  A newsvendor pricing game , 2004, IEEE Transactions on Systems, Man, and Cybernetics - Part A: Systems and Humans.

[27]  Evan L. Porteus.  The Newsvendor Problem , 2008 .

[28]  Ioana Popescu,et al.  An Elasticity Approach to the Newsvendor with Price-Sensitive Demand , 2011, Oper. Res..

[29]  Mark E. Ferguson,et al.  Relicensing as a Secondary Market Strategy , 2012, Manag. Sci..

[30]  Tsan-Ming Choi,et al.  Handbook of Newsvendor Problems , 2012 .

[31]  Jiang Zhang,et al.  Random yield supply chain with a yield dependent secondary market , 2010, Eur. J. Oper. Res..

[32]  Xuanming Su,et al.  Strategic Customer Behavior, Commitment, and Supply Chain Performance , 2007, Manag. Sci..

[33]  Xiaolin Xu,et al.  The effect of demand uncertainty in a price setting newsvendor model , 2008, 2008 International Conference on Service Systems and Service Management.