“Bricks vs. Clicks”: The impact of manufacturer encroachment with a dealer leasing and selling of durable goods

In durable goods markets, many brand name manufacturers, including IBM, HP, Epson, and Lenovo, have adopted dual-channel supply chains to market their products. There is scant literature, however, addressing the product durability and its impact on players’ optimal strategies in a dual-channel supply chain. To fill this void, we consider a two-period dual-channel model in which a manufacturer sells a durable product directly through both a manufacturer-owned e-channel and an independent dealer who adopts a mix of selling and leasing to consumers. Our results show that the manufacturer begins encroaching into the market in Period 1, but the dealer starts withdrawing from the retail channel in Period 2. Moreover, as the direct selling cost decreases, the equilibrium quantities and wholesale prices become quite angular and often nonmonotonic. Among other results, we find that both the dealer and the supply chain may benefit from the manufacturer’s encroachment. Our results also indicate that both the market structure and the nature of competition have an important impact on the player’s (dealer’s) optimal choice of leasing and selling.     

Maximum-revenue tariff under Bertrand duopoly with unknown costs

This paper considers an international trade under Bertrand model with differentiated products and with unknown production costs. The home government imposes a specific import tariff per unit of imports from the foreign firm. We prove that this tariff is decreasing in the expected production costs of the foreign firm and increasing in the production costs of the home firm. Furthermore, it is increasing in the degree of product substitutability. We also show that an increase in the tariff results in both firms increasing their prices, an increase in both expected sales and expected profits for the home firm, and a decrease in both expected sales and expected profits for the foreign firm.     

Impact of product pricing and timing of investment decisions on supply chain co-opetition

In supply chain co-opetition, firms simultaneously compete and co-operate in order to maximize their profits. We consider the nature of co-opetition between two firms: The product supplier invests in the technology to improve quality, and the purchasing firm (buyer) invests in selling effort to develop the market for the product before uncertainty in demand is resolved. We consider three different decision making structures and discuss the optimal configuration from each firm’s perspective. In case 1, the supplier invests in product quality and sets the wholesale price for the product. The buyer then exerts selling effort to develop the market and following demand potential realization, sets the resale price. In case 2, the supplier invests in product quality followed by the buyer’s investment in selling effort. Then, after demand potential is observed, the supplier sets the wholesale price and the buyer sets the resale price. Finally, in case 3, both firms simultaneously invest in product quality and selling effort, respectively. Subsequently, observing the demand potential, the supplier sets the wholesale price and the buyer sets the resale price. We compare all configuration options from both the perspective of the supplier and the buyer, and show that the level of investment by the firms depends on the nature of competition between them and the level of uncertainty in demand. Our analysis reveals that although configuration 1 results in the highest profits for the integrated channel, there is no clear dominating preference on system configuration from the perspective of both parties. The incentives of the co-opetition partners and the investment levels are mainly governed by the cost structure and the level of uncertainty in demand. We examine and discuss the relation between system parameters and the incentives in desiging the supply contract structure.     

Price and quality competition: The effect of differentiation and vertical integration

This paper studies an instance of price and quality competition between firms as seen in the recent Internet market. Consumers purchase a product based on not only its price but also its quality level; therefore, two firms compete in determining their prices and quality levels to maximize their profits. Characterizing this competition from a microeconomic viewpoint, we consider two possible business strategies that firms can utilize to overcome the competition—the differentiation and the vertical integration with another complementary firm. We show an interesting result not seen in the well-known Bertrand price competition: not only does the differentiation always increase the firms’ profits, but also it can increase the consumer’s welfare in a quality-sensitive market. We further derive that under some mild conditions the monopolistic vertical integration that excludes the combination-purchase with a competitor’s product is beneficial for both the integrated firm and its consumers.     

Wholesale-price contract of supply chain with information gathering

This paper investigates a wholesale-price contract of supply chain under the endogenous information structure. This supply chain consists of one supplier and one retailer during the selling season. The retailer does not know his selling cost but can spend resources to acquire information. The supplier offers a contract, which induces the retailer to gather information and generate more production orders with beta costs. We find that there exists an upper bound of the information gathering cost such that the supplier induces the retailer to gather information. The increasing cost of information gathering may decrease the order quantity and wholesale price. Moreover, the cost beta has an impact on the expected profits of the two parties. With the increasing cost of information gathering, the supplier’s expected profit is reduced, while that of the retailer becomes ambiguous in terms of the distribution function and the interval of selling cost information. Finally, a numerical example is presented to explain the main results.     

Supplier switching decisions

In order to maximize profit, a buying firm should continuously search for and access sources which offer more favorable prices. While the literature is replete with works on the formation and development of buyer–supplier relationships, there is surprisingly only scarce research on the termination of such relationships and supplier switching. Using the concept of switching costs in a principal-agent framework, we at first analyze whether a firm switches the entire or a partial quantity to an alternative supplier when there is either symmetric or asymmetric information about the alternative supplier’s cost structure. Information asymmetry results in inert supplier switching decisions. Subsequently, we extend our model and take competitive reactions of the incumbent supplier and economies of scale effects into consideration. We find conditions under which ‘no’, ‘partial’ and ‘complete’ switching occurs, which depend on the buying firm’s beliefs about the alternative supplier’s unit costs, switching costs, the price offered by the incumbent supplier, and refinements of the price offered by the incumbent supplier due to competitive reactions and economies of scale. Broader implications for supplier relationship management and sourcing strategy decisions are also provided.     

零售商主导的模糊供应链博弈——考虑销售努力的情形

以包含一个制造商与一个零售商的两级供应链为研究对象,考虑零售商居于主导地位并付出销售努力时供应链各成员的决策。结合经济环境的不确定性,将市场需求函数和制造商的制造成本、零售商的经营成本视为模糊变量;运用斯塔克尔伯格模型刻画零售商和制造商之间的博弈过程,并引入期望值模型、机会约束模型来解决最优决策问题;通过一个数值算例证明了供应链博弈模型的有效性。研究表明,在均衡结果中,考虑到零售商所承担的销售努力成本,其总体期望值利润相比于制造商而言偏低,但单位产品边际利润较高。原因在于,零售商的主导地位使其不仅通过销售努力提高产品销量,提高了供应链的整体利润,同时也能够采用压低批发价格的方式,使自身在供应链中获取更多收益。     

考虑消费者退货的双渠道订货量决策研究

在考虑消费者退货下,构建由制造商和零售商组成的二级供应链模型,研究了双方的订货量决策问题,并分析不同策略以及决策顺序对均衡结果和制造商开通直销渠道的影响。研究发现:在单渠道中,提供退款保证可提高订货量、制造商和零售商利润。当直销成本较大时,制造商将不开通直销渠道;提供退款保证有利于制造商开通直销渠道。在双渠道中,提供退款保证能够提高直销量、总订货量和制造商利润;直销量、总订货量、制造商利润和总利润都随直销成本递减;在顺序决策下,制造商利润和总利润更高。     

A multi-item newsvendor problem with preseason production and capacitated reactive production

Given items with short life cycles or seasonal demands, one can potentially improve profits by producing during the selling season, especially when its production capacity is substantial. We develop a two-stage, multi-item model incorporating reactive production that employs a firm’s internal capacity. Production occurs in an uncapacitated preseason stage and a capacitated reactive stage. Demands occur in the reactive stage. Reactive capacities are pre-allocated to each item in the preseason stage and cannot be changed during the reactive stage. Reactive production occurs during the selling season with full knowledge of demands. The objective is expected profit maximization. Unsatisfied demand is lost. The revenue, salvage value, and production and lost sales costs are proportional. Assuming no fixed costs, we present a simple algorithm for computing optimal policies. For a model with fixed costs for allocating preseason stage production and reactive stage capacity to product families, we characterize optimal policies and develop optimal and heuristic algorithms.     

供应链纵向结构对EPR政策激励效果的影响研究

为了揭示供应链纵向结构对EPR政策激励效果的影响,本文通过构建EPR政策约束下由上游制造商和下游客户所组成的供应链决策模型,分别在纵向一体化和纵向分离两种典型的供应链纵向市场结构下,考察了EPR政策对制造商环保性能和可循环性设计决策的激励影响。结果表明:在不同的供应链纵向结构下,由于制造商与客户之间的利益协调机制存在着差异,使得EPR政策对制造商环境设计选择的激励效果将发生变化。在纵向一体化结构下EPR政策对制造商可循环性的激励效果更强;而EPR政策对环保性能的激励在哪种供应链纵向结构下更强是不确定的,最终还取决于行业本身在生产成本和环境成本等方面的特征。最后,基于本文的研究结论给出了EPR政策与产业政策相配套的政策建议。     

基于电商平台的混合销售渠道对供应链决策的影响研究

考虑到电商平台对消费者强大的吸引力,本文建立了由供应商和平台商构成的基于电商平台混合销售的供应链模型。混合销售渠道包含直销和分销,其中平台商拥有电商平台,供应商通过电商平台进行直销,平台商分享一定的收益;而分销是指平台商从供应商处批发产品进行销售。分别建立了集中式和分散式决策模型,研究发现:随着消费者对分销渠道接受程度的提高,两种情形下直销渠道的零售价不变,分销渠道的零售价提高;分散式情形下的批发价、供应商和平台商的利润均提高;随着供应商分享收益比例的提高,两种渠道的零售价都降低,但批发价提高,供应商的利润提高,而平台商的利润下降,但供应链的总利润提高;研究得到了保证博弈双方都能从直销渠道中获利的收益分享比例范围。     

A note on price and quality competition between asymmetric firms

This paper analyzes the impact of asymmetry between firms on the outcome of price and quality competition from a microeconomic viewpoint. Consumers purchase a product based on not only its price but also its quality level; therefore, two firms compete in determining their prices and quality levels to maximize their profits. The asymmetry arises from the difference in consumers’ loyalty to each firm; that asymmetry then determines a character of differentiation between firms. Our purpose is to show how asymmetry influences competition under varying consumers’ price- and quality-sensitivity. In doing so, we extend earlier work in the area of price and quality competition. We show that in both the moderately quality-sensitive and price-sensitive markets, higher consumers’ sensitivity as well as lower consumers’ loyalty to any firm leads to intense competition, resulting in a decrease of both firms’ equilibrium profits. On the other hand, in highly quality-sensitive market, asymmetry compels the smaller firm to change its competitive strategy. In general, this is more beneficial to the larger firm, as the smaller firm’s profit tends to decline. In the worst case, the smaller firm is driven out of business under equilibrium.     

基于在线评论的多个竞争制造商和零售商的产品定价策略

在线评论作为一种产品信息传播载体,越来越受到网上电商及消费者的重视,并在很大程度上影响消费者的购买决策。本文在多个竞争性制造商为在线零售商提供可替代性产品并通过零售商销售给网络消费者的电子商务环境下,研究在线评论信息如何影响网络消费者购买决策及在线零售商和制造商的定价策略。以neo-Hoteling模型为基础,构建了依赖零售渠道在线评论的消费者选择模型,并通过模型求解定量分析了二级供应链结构分散系统下在线评论对多个竞争性制造商及零售商最优决策的影响。得到当制造商基于评论制定最优定价策略时,在线评论对市场竞争强度没有影响,但决定潜在市场大小;各产品的均衡批发价及销售价按一定的比例随评论揭示的该产品与其他产品质量均值之差(正或负)增加或减少,评论信息通常会使制造商因好评而获利,由于评论增加了不同产品需求的不对称性,零售商因而具有更大的调价空间,往往通过提高(降低)占据有利(不利)评论的产品价格获得更高的利润。     

Optimal policies for inventory usage,production and pricing of fashion goods over a selling season

A short selling season and highly uncertain demands prior to the season characterize production and selling of fashion goods. Once the season starts and demands turn up with a peak interest in the beginning, monopoly becomes under tremendous pressure to produce the required amount so as not to disappoint its customers. It motivates the monopoly to prepare significant inventories by the opening day. Unfortunately, even the most advanced techniques for demand forecasting are likely to induce either an overestimate or underestimate of the initial inventories. Both affect the monopoly's profit. Overestimation results in surplus, which may never be sold, and excessive inventory holding costs. Underestimation implies sales as well as customer loyalty losses. Given inventory level at the beginning of the selling season, we derive policies of handling this inventory, production capacity and product prices in order to maximize the profit and thus diminish the effect of inherent inaccuracy of initial inventory estimation of fashion goods. A case of bookstore management illustrates the effectiveness of the suggested strategies.     

Operationalizing technology improvements in product development decision-making

Achieving competitive advantage and price premiums in many technology-based markets requires the incorporation of current technology in new products. To do so, firms in hyper-competitive environments increasingly plan and design their products concurrent with the independent development and validation of underlying technologies. Simultaneous validation of a core technology has important implications for a company’s product positioning and launch sequence decisions making these traditional marketing decisions relevant to operations managers. Prior research has shown that to minimize cannibalization in the absence of such improvements in technology, a firm should not launch low-end products before high-end products. However, concurrent evolution of technology can make it desirable and even necessary to introduce low-end products before high-end products. This is because in technology-based industries, improvements in technology delay the introduction of a high-end product, and a firm must trade-off the benefit of launching the low-end product earlier (greater discounted profits) against the cost of cannibalization of high-end product sales. High-end product cannibalization can be further reduced by offering the customer an option to upgrade from the low-end to high-end product, with important implications for the firm’s product positioning and introduction sequence decisions. Based on our study in the high technology industry, we model the product positioning and introduction sequence decisions under the simultaneous evolution of technology. Our analysis indicates that it may be optimal in a variety of circumstances for a firm to launch products in an increasing order of performance, even in the absence of network externalities. Besides presenting analytical results for product positioning and profit from different introduction sequences, the paper also makes a contribution to managerial practice by providing insights in the form of a conceptual framework.     

Target market selection and marketing effort under uncertainty: The selective newsvendor

We consider a firm that markets, procures, and delivers a good with a single selling season in a number of different markets. The price for the good is market-dependent, and each market has an associated demand distribution, with parameters that depend on the amount of marketing effort applied. Given long procurement lead-times, the firm must decide which markets it will serve prior to procuring the good. We develop a profit maximizing model to address the firm’s integrated market selection, marketing effort, and procurement decisions. The model implicitly accounts for inventory pooling across markets, which reduces safety stock costs but increases model complexity. The resulting model is a nonlinear integer optimization problem, for which we develop specialized solution methods. For the case in which budget constraints exist, we provide a novel solution approach that uses a tailored branch-and-bound algorithm. Our approach solves a broad range of 3000 test instances in an average of less than 2 seconds, significantly outperforming a leading commercial global optimization solver.     

三级供应链企业间交叉持股时均衡定价及市场绩效研究

本文构建三级供应链企业间纵向交叉持股时的Stackelberg定价博弈模型,采用逆推归纳法推演出供应链各厂商交叉持股时的均衡定价及其利润公式,分析了交叉持股对三级供应链均衡市场价格、厂商利润、消费者剩余和经济福利的影响。研究结果表明,较之无交叉持股,仅下游厂商对上游厂商单向持股,对供应链的绩效没有影响;而适当增大上游厂商对下游厂商持股,限制下游厂商对上游厂商持股,能有效降低市场价格,提高供应链及各厂商的利润,增加消费者剩余,改善经济福利,实现供应链各厂商与消费者的共赢。     

Coordination in decentralized assembly systems with uncertain component yields

The literature on assembly systems with random component yields has focused on centralized systems, where a single decision maker chooses all components’ production quantities and incurs all the costs. We consider a decentralized setting where the component suppliers choose their production quantities based solely on their own cost/reward structure, and the assembly firm makes ordering decisions based on its own cost/reward structure. When the suppliers control their inputs but the outputs exhibit random yields, coordination in such systems becomes quite complex. In such situations, incentive alignment control mechanisms are needed so that the suppliers will choose production quantities as in the centralized system case. One such mechanism is to penalize the supplier with the worse delivery performance. We analyze the conditions under which system coordination is achieved while respecting participation constraints. Further, we determine the optimal component ordering policy for the assembly firm and derive the optimal coordinating penalties.     

Consumer environmental awareness and competition in two-stage supply chains

This paper focuses on the impact of competition and consumers’ environmental awareness on key supply chain players. We consider both the production competition between partially substitutable products made by different manufacturers, and the competition between retail stores. We use two-stage Stackelberg game models to investigate the dynamics between the supply chain players given three supply chain network structures. We find that as consumers’ environmental awareness increases, retailers and manufacturers with superior eco-friendly operations will benefit; while the profitability of the inferior eco-friendly firm will tend to increase if the production competition level is low, and will tend to decrease if the production competition level is high. In addition, higher levels of retail competition may make manufacturers with inferior eco-friendly operations more likely to benefit from the increase of consumers’ environmental awareness. Moreover, as production competition intensifies, the profits of the retailers will always increase, while the profits of the manufacturers with inferior eco-friendly operations will always decrease. The profitability of the manufacturers with superior eco-friendly operations will also tend to decrease, unless consumers’ environmental awareness is high and the superior manufacturer has a significant cost advantage related to product environmental improvement.     

Product line selection and pricing under a share-of-surplus choice model

Product line selection and pricing decisions are critical to the profitability of many firms, particularly in today’s competitive business environment in which providers of goods and services are offering a broad array of products to satisfy customer needs.We address the problem of selecting a set of products to offer and their prices when customers select among the offered products according to a share-of-surplus choice model. A customer’s surplus is defined as the difference between his utility (willingness to pay) and the price of the product. Under the share-of-surplus model, the fraction of a customer segment that selects a product is defined as the ratio of the segment’s surplus from this particular product to the segment’s total surplus across all offered products with positive surplus for that segment.We develop a heuristic procedure for this non-concave, mixed-integer optimization problem. The procedure utilizes simulated annealing to handle the binary product selection variables, and a steepest-ascent-style procedure that relies on certain structural properties of the objective function to handle the non-concave, continuous portion of the problem involving the prices. We also develop a variant of our procedure to handle uncertainty in customer utilities. In computational studies, our basic procedures perform extremely well, producing solutions whose objective values are within about 5% of those obtained via enumerative methods. Our procedure to handle uncertain utilities also performs well, producing solutions with expected profit values that are roughly 10% higher than the corresponding expected profits from solutions obtained under the assumption of deterministic utilities.