Pricing and advertisement in a manufacturer–retailer supply chain

We use a game theoretical approach to study pricing and advertisement decisions in a manufacturer–retailer supply chain when price discounts are offered by both the manufacturer and retailer. When the manufacturer is the leader of the game, we obtained Stackelberg equilibrium with manufacturer’s local allowance, national brand name investment, manufacturer’s preferred price discount, retailer’s price discount, and local advertising expense. For the special case of two-stage equilibrium when the manufacturer’s price discount is exogenous, we found that the retailer is willing to increase local advertising expense if the manufacturer increases local advertising allowance and provides deeper price discount, or if the manufacturer decreases its brand name investment. When both the manufacturer and retailer have power, Nash equilibrium in a competition game is obtained. The comparison between the Nash equilibrium and Stackelberg equilibrium shows that the manufacturer always prefers Stackelberg equilibrium, but there is no definitive conclusion for the retailer. The bargaining power can be used to determine the profit sharing between the manufacturer and the retailer. Once the profit sharing is determined, we suggest a simple contract to help the manufacturer and retailer obtain their desired profit sharing.     

Coordination of a three-level supply chain (supplier–manufacturer–retailer) with permissible delay in payments and price discounts

Different coordination mechanisms are used to manage supply chains. This paper investigates a coordination of a three-level supply chain (supplier–manufacturer–retailer) by coupling two well-known trade credit mechanisms that are widely used in practice, permissible delay in payments and price discounts, where the length of the delay period and discounts offered along the supply chain are decision variables. The paper investigates nine different cases of delay in payments along with eight cases of price discounts among the three players in the supply chain. A numerical example was presented to compare between the cases considered. Also, extensive sensitivity analyses were performed to study the effect of changing the model parameters on the optimal decisions. In addition, we point out the limitations of each model developed in this paper. The numerical examples and the sensitivity analyses conclude that the coupling of delay in payments and price discounts increases the profit of the supply chain more than using only a single mechanism at a time.     

Optimal contracts and the manufacturer’s pricing strategies in a supply chain with an inequity-averse retailer

Studies in the supply chain literature have typically focused on profit or revenue maximization and assumed that agents within the supply chain are self-interested and only care about their own monetary payoffs. Research in these areas, however, rarely considers an important phenomenon called inequity aversion in which the object pursued by agents within the supply chain is not only their own profit maximization but also the equity of profit allocation. In fact, when agents within a supply chain collaborate with each other to serve a market, the scheme of profit allocation between them usually plays a determinate role in cooperation. Taking into account the impact of agents’ behavior of inequity aversion on the coordination of the supply chain, this paper investigates the optimal contracts and the manufacturer’s pricing strategies in a single-manufacturer and single-retailer supply chain. In this way, we obtain two interesting results: (1) the retailer’s equity aversion largely affects the manufacturer’s decision making, which is not always bad for the manufacturer; and (2) the retailer’s inequity aversion as well as the consumer’s price-sensitive coefficient plays a dominant role in the manufacturer’s decision making.     

Vertical cooperative advertising and pricing decisions in a manufacturer–retailer supply chain: A game-theoretic approach

Manufacturers can increase the advertising expenditures of their retailers by bearing a fraction of the occurring costs within the framework of a vertical cooperative advertising program. We expand the existing research which deals with advertising and pricing decisions in a manufacturer–retailer supply chain contemporaneously. By means of game theory, four different relationships between the channel members are considered: Firstly, three non-cooperative games with either symmetrical distribution of power or asymmetrical distribution with one player being the leader in each case, and one cooperative game where both players tend to maximize the total profit. The latter is complemented by a bargaining model, which proposes a fair split of profit on the basis of the players’ risk attitude and bargaining power. Our main findings are as follows: (a) In contrast to previous analyses, we do not limit the ratio between manufacturer’s and retailer’s margin, which provides more general insights into the effects of the underlying distribution of power within the channel. (b) The highest total profit is gained when both players cooperate. This behavior puts also the customers in a better position, as it produces the lowest retail price as well as the highest advertising expenditures compared to the other configurations.     

Mean–variance analysis of a single supplier and retailer supply chain under a returns policy

In the literature, most of the supply chain coordinating policies target at improving the supply chain’s efficiency in terms of expected cost reduction or expected profit improvement. However, optimizing the expected performance alone cannot guarantee that the realized performance measure will fall within a small neighborhood of its expected value when the corresponding variance is high. Moreover, it ignores the risk aversion of supply chain members which may affect the achievability of channel coordination. As a result, we carry out in this paper a mean–variance (MV) analysis of supply chains under a returns policy. We first propose an MV formulation for a single supplier single retailer supply chain with a newsvendor type of product. The objective of each supply chain decision maker is to maximize the expected profit such that the standard deviation of profit is under the decision maker’s control. We study both the cases with centralized and decentralized supply chains. We illustrate how a returns policy can be applied for managing the supply chains to address the issues such as channel coordination and risk control. Extensive numerical studies are conducted and managerial findings are proposed.     

Establishing Nash equilibrium of the manufacturer–supplier game in supply chain management

We study a game model of multi-leader and one-follower in supply chain optimization where n suppliers compete to provide a single product for a manufacturer. We regard the selling price of each supplier as a pre-determined parameter and consider the case that suppliers compete on the basis of delivery frequency to the manufacturer. Each supplier's profit depends not only on its own delivery frequency, but also on other suppliers' frequencies through their impact on manufacturer's purchase allocation to the suppliers. We first solve the follower's (manufacturer's) purchase allocation problem by deducing an explicit formula of its solution. We then formulate the n leaders' (suppliers') game as a generalized Nash game with shared constraints, which is theoretically difficult, but in our case could be solved numerically by converting to a regular variational inequality problem. For the special case that the selling prices of all suppliers are identical, we provide a sufficient and necessary condition for the existence and uniqueness of the Nash equilibrium. An explicit formula of the Nash equilibrium is obtained and its local uniqueness property is proved.     

Response time and vendor–assembler relationship in a supply chain

Relationships between an assembler and a vendor in a supply chain are investigated in two-period models when the assembler wants to reduce response time by incentive systems. The assembler may offer myopic or farsighted incentive contracts to the vendor, under short-term or long-term relationships. Incentive schemes, effort levels, and expected payoffs under different perspectives and relationships are examined. We find that a farsighted assembler provides the vendor with a higher incentive than a myopic assembler in the first period. A long (short)-term relationship is preferred if the value of farsightedness under a long-term relationship is greater (less) than the switching option value under a short-term relationship. We propose several sufficient conditions regarding which perspectives and relationships are preferred.     

Traveling wave solutions for a predator–prey system with two predators and one prey

We study a predator–prey model with two alien predators and one aborigine prey in which the net growth rates of both predators are negative. We characterize the invading speed of these two predators by the minimal wave speed of traveling wave solutions connecting the predator-free state to the co-existence state. The proof of the existence of traveling waves is based on a standard method by constructing (generalized) upper-lower-solutions with the help of Schauder’s fixed point theorem. However, in this three species model, we are able to construct some suitable pairs of upper-lower-solutions not only for the super-critical speeds but also for the critical speed. Moreover, a new form of shrinking rectangles is introduced to derive the right-hand tail limit of wave profile.     

The spreading speed for a predator–prey model with one predator and two preys

We study a predator–prey model with two preys and one predator. Our main concern is the invasion process of the predator into the habitat of two aborigine preys. We consider the case when the two preys are weak competitors in the absence of predator. Under certain conditions, we are able to characterize the asymptotic spreading speed by the parameters of the model.     

A principal–agent problem with heterogeneous demand distributions for a carbon capture and storage system

Mechanism design problems optimize contract offerings from a principal to different types of agents who have private information about their demands for a product or a service. We study the implications of uncertainty in agents’ demands on the principal’s contracts. Specifically, we consider the setting where agents’ demands follow heterogeneous distributions and the principal offers a menu of contracts stipulating quantities and transfer payments for each demand distribution. We present analytical solutions for the special case when there are two distributions each taking two discrete values, as well as a method for deriving analytical solutions from numerical solutions. We describe one application of the model in carbon capture and storage systems to demonstrate various types of optimal solutions and to obtain managerial insights.     

An optimal batch size for integrated production–inventory policy in a supply chain

This study presents a new integrated production–inventory policy under a finite planning horizon and a linear trend in demand. We assume that the vendor makes a single product and supplies it to a buyer with a non-periodic and just-in-time (JIT) replenishment policy in a supply chain environment. The objective is to minimize the joint total costs incurred by the vendor and the buyer. In this study, first, we develop a mathematical model and prove that it has the optimal solution. Then, we describe an explicit solution procedure for obtaining the optimal solution. Finally, we provide two numerical examples to illustrate both increasing and decreasing demands in our proposed model, and we show that the performance of the integrated consideration is better than the performance of any independent decision from either the buyer or the vendor.     

Coordinating advertising and pricing in a manufacturer–retailer channel

Cooperative advertising is a practice that a manufacturer pays retailers a portion of the local advertising cost in order to induce sales. Cooperative advertising plays a significant role in marketing programs of channel members. Nevertheless, most studies to date on cooperative advertising have assumed that the market demand is only influenced by advertising expenditures but not by retail price. This paper addresses channel coordination by seeking optimal cooperative advertising strategies and equilibrium pricing in a two-member distribution channel. We establish and compare two models: a non-cooperative, leader–follower game and a cooperative game. We develop propositions and insights from the comparison of these models. The cooperative model achieves better coordination by generating higher channel-wide profits than the non-cooperative model with these features: (a) the retailer price is lower to consumers; and (b) the advertising efforts are higher for all channel members. We identify the feasible solutions to a bargaining problem where the channel members can determine how to divide the extra profits.     

Neumann problem for the Lavrent’ev–Bitsadze equation with two type-change lines in a rectangular domain

The Neumann problem for an equation with two perpendicular internal type-change lines in a rectangular domain is investigated. Uniqueness and existence theorems are proved by applying the spectral method. The separation of variables yields an eigenvalue problem for an ordinary differential equation. This problem is not self-adjoint, and the system of its eigenfunctions is not orthogonal. A corresponding biorthogonal system of functions is constructed and proved to be complete. The completeness result is used to prove a necessary and sufficient uniqueness condition for the problem under study. Its solution is constructed in the form of the sum of a biorthogonal series.     

Spatial propagation of a lattice predation–competition system with one predator and two preys in shifting habitats

This paper deals with a discrete diffusive predator–prey system involving two competing preys and one predator in a shifting habitat induced by the climate change. By applying Schauder's fixed-point theorem on various invariant cones via constructing several pairs of generalized super- and subsolutions, we establish four different types of supercritical and critical forced extinction waves, which describe the conversion from the state of a saturated aboriginal prey with a pair of invading alien predator–prey, two competing aboriginal coexistent preys with an invading alien predator, a pair of aboriginal coexistent predator–prey and an invading alien prey, and the coexistence of three species to the extinction state, respectively. Meanwhile, the nonexistence of some subcritical forced waves is showed by contradiction. Furthermore, some numerical simulations are given to present and promote the theoretical results.     

Retailer or e-tailer? Strategic pricing and economic-lot-size decisions in a competitive supply chain with drop-shipping

Drop-shipping is an arrangement whereby an e-tailer, who does not hold inventories, processes orders and requests a manufacturer to ship products directly to the end customers. To explore the economic benefits of adopting drop-shipping distribution strategy in a competitive environment, we investigate the profitability and the efficiency of the drop-shipping channel as compared to the traditional channel. Specifically, we develop Economic Order Quantity (EOQ) games with pricing and lot-sizing decisions to examine the strategic interactions between a manufacturer and its retailer/e-tailer in the traditional/drop-shipping distribution channels. We identify conditions under which the drop-shipping channel profitably outperforms the traditional one. It is found that the economic interests of adopting drop-shipping distribution for the channel members may not always be consistent. There are cases where only the manufacture would favour drop-shipping. In this study, we also reveal that the inefficiency caused by lack of coordination in the traditional channel can be alleviated in the drop-shipping channel where the lot-sizing decision is made by the manufacturer.     

A Hybrid Taguchi–Immune approach to optimize an integrated supply chain design problem with multiple shipping

Supply chain network design is considered a strategic decision level problem that provides an optimal platform for the effective and efficient supply chain management. In this research, we have mathematically modeled an integrated supply chain design. To ensure high customer service levels, we propose the inclusion of multiple shipping/transportation options and distributed customer demands with fixed lead times into the supply chain distribution framework and formulated an integer-programming model for the five-tier supply chain design problem considered. The problem has been made additionally complex by including realistic assumptions of nonlinear transportation and inventory holding costs and the presence of economies of scale. In the light of aforementioned facts, this research proposes a novel solution methodology that amalgamates the features of Taguchi technique with Artificial Immune System (AIS) for the optimum or near optimum resolution of the problem at hand. The performance of the proposed solution methodology has been benchmarked against a set of test instances and the obtained results are compared against those obtained by Genetic Algorithm (GA), Hybrid Taguchi–Genetic Algorithm (HTGA) and AIS. Simulation results indicate that the proposed approach can not only search for optimal/near optimal solutions in large search spaces but also has good repeatability and convergence characteristics, thereby proving its superiority.     

The correct proofs for the optimal ordering policy with?trade credit under two different payment methods in?a?supply chain system

Cheng et al. (Top, 2010. doi:10.1007/s11750-08-0062-3) consider the optimal ordering policy with trade credit under two different payment methods. Under Assumption (5) by Cheng et al., the annual total relevant cost TRC(T) is only defined on a finite interval. However, Cheng et al. treat the domain of TRC(T) to be the set of all positive numbers such that the formulation and optimal solution of TRC(T) cause some errors. So, the main purpose of this paper not only removes those shortcomings by Cheng et al. but also presents the correct proofs for Theorems?1 and?2 of Cheng et?al.     

Approximate controllability for linearized compressible barotropic Navier–Stokes system in one and two dimensions

In this paper we consider compressible barotropic Navier–Stokes equations in one and two dimensions linearized around a constant steady state with Dirichlet boundary conditions. We explore the controllability of this linearized system using a control only for the velocity equation. We prove that the system with homogeneous Dirichlet boundary conditions, is approximately controllable by a localized interior control when time is sufficiently large.     

Qualifying for a government’s scrappage program to stimulate consumers’ trade-in transactions? Analysis of an automobile supply chain involving a manufacturer and a retailer

We investigate an automobile supply chain where a manufacturer and a retailer serve a market with a fuel-efficient automobile under a scrappage program by the government. The program awards a subsidy to each consumer who trades in his or her used automobile with a new fuel-efficient automobile, if the manufacturer’s suggested retail price (MSRP) for the new one does not exceed a cutoff level. We derive the conditions assuring that the manufacturer has an incentive to qualify for the program, and find that when the cutoff level is low, the manufacturer may be unwilling to qualify for the program even if the subsidy is high. We also show that when the manufacturer qualifies for the program, increasing the MSRP cutoff level would raise the manufacturer’s expected profit but may decrease the expected sales. A moderate cutoff level can maximize the effectiveness of the program in stimulating the sales of fuel-efficient automobiles, whereas a sufficiently high cutoff level can result in the largest profit for the manufacturer. The retailer’s profit always increases when the manufacturer chooses to qualify for the program. Furthermore, we compute the government’s optimal MSRP cutoff level and subsidy for a given sales target, and find that as the program budget increases, the government should raise the subsidy but reduce the MSRP cutoff level to maximize sales.