×

zbMATH — the first resource for mathematics

The impact of manufacturer rebates on supply chain profits. (English) Zbl 1162.90418
Summary: Manufacturer rebates are commonly used as price discount tools for attracting end customers. In this study, we consider a two-stage supply chain with a manufacturer and a retailer, where a single seasonal product faces uncertain and price-sensitive demand. We characterize the impact of a manufacturer rebate on the expected profits of both the manufacturer and the retailer. We show that unless all of the customers claim the rebate, the rebate always benefits the manufacturer. Our results thus imply that “mail-in rebates,” where some customers end up not claiming the rebate, particularly when the size of the rebate is relatively small, always benefit the manufacturer. On the other hand, an “instant rebate,” such as the one offered in the automotive industry where every customer redeems the rebate on the spot when he/she purchases a car, does not necessarily benefit the manufacturer.

MSC:
90B30 Production models
90B50 Management decision making, including multiple objectives
PDF BibTeX XML Cite
Full Text: DOI
References:
[1] Ailawadi, J Retailing 77 pp 299– (2001)
[2] Ali, J Business Res 29 pp 239– (1994)
[3] Ault, Economic Inquiry 38 pp 570– (2000)
[4] Belk, J Consumer Res 2 pp 157– (1975)
[5] Beltramini, J Advertising Res 43 pp 16– (2003) · doi:10.2501/JAR-43-1-16-24
[6] Bruce, Marketing Sci 25 pp 350– (2006)
[7] Supply chain coordination with contracts, Handbooks in operations research and management science, vol. 11. Supply chain management: design, coordination and operation, (Editors), Elsevier, Amsterdam, 2003, pp. 229–339.
[8] Cachon, Manufact Service Oper Manag
[9] Chen, IEEE Trans Syst Man Cybernetics–Part A: Systems and Humans 34 pp 450– (2004)
[10] Chen, Naval Res Logist 53 pp 117– (2006)
[11] Crafton, J Consumer Res 7 pp 211– (1980)
[12] Emmons, Manag Sci 44 pp 276– (1998)
[13] Erdem, J Market Res 38 pp 445– (2001)
[14] Gerstner, Am Economic Rev 81 pp 872– (1991)
[15] Gerstner, Econ Lett 36 pp 5– (1991)
[16] Gerstner, Market Sci 14 pp 43– (1995)
[17] Gerstner, Am Economic Rev 84 pp 1437– (1994)
[18] Grabowski, Quarterly J Economics 84 pp 217– (1970)
[19] Granot, Naval Res Logist 52 pp 765– (2005)
[20] Gupta, J Market Res 25 pp 342– (1988)
[21] Hanemann, Econometrica 52 pp 541– (1984)
[22] Hoch, J Experimental Psychology: Learning, Memory, and Cognition 11 pp 719– (1985)
[23] Hoch, J Market Res 13 pp 17– (1995)
[24] Jolson, J Advertising Res 27 pp 33– (1987)
[25] , Prices and optimal inventory policy, Studies in applied probability and management science, , (Editors), Stanford University Press, Stanford, CA, 1962, pp. 159–172.
[26] Khouja, Eur J Oper Res 174 pp 706– (2006)
[27] Supply chain contracting and coordination with stochastic demand, Quantitative Models for Supply Chain Management, , (Editors), Kluwer, Boston, 1998, pp. 233–268.
[28] Lichtenstein, J Consumer Res 16 pp 55– (1989)
[29] Mayhew, J Consum Res 19 pp 62– (1992)
[30] Mazumdar, J Market 69 pp 84– (2005)
[31] Mills, Quarterly J Econ 73 pp 116– (1959)
[32] Moon, J Retailing 82 pp 1– (2006)
[33] Murray, Rev Econ Statistics 58 pp 75– (1976)
[34] Oum, Logist Transport Rev 22 pp 195– (1986)
[35] Petruzzi, Oper Res 47 pp 183– (1999)
[36] Pulford, Br J Psychol 87 pp 431– (1996) · doi:10.1111/j.2044-8295.1996.tb02600.x
[37] , Managing rebate promotions, Working paper, Sauder School of Business, University of British Columbia, 2005.
[38] , , Designing and managing the supply chain: concepts, strategies and case studies, 2nd ed., McGraw-Hill, Boston, 2003.
[39] Soman, J Market Res 35 pp 427– (1998)
[40] Song, Manufact Service Oper Manage
[41] Taylor, Manage Sci 48 pp 992– (2002)
[42] , , Modeling supply chain contracts: A review, Quantitative models for supply chain management, , (Editors), Kluwer, Boston, 1998, pp. 299–336.
[43] Vallone, J Personality Social Psychol 58 pp 582– (1990)
[44] Wang, Manage Sci 50 pp 34– (2004)
[45] Welam, Manage Sci 28 pp 1313– (1982)
[46] Weng, Manage Sci 41 pp 1509– (1995)
[47] Wetzel, J Consumer Res 9 pp 195– (1982)
[48] Whitin, Manage Sci 2 pp 61– (1955)
[49] Behavioral perspective on pricing: Buyers’ subjective perceptions of price revisited, Issues in pricing: Theory and research, (Editor), Lexington Books, Lexington, MA, 1988, pp. 35–57.
[50] , Coordinated pricing and production/procurement decisions: a review, Managing business interfaces: Marketing, engineering, and manufacturing perspectives, (Editors), Kluwer, Norwell, MA, 2004, pp. 65–103.
[51] Zhang, Manage Sci 46 pp 348– (2000)
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.