zbMATH — the first resource for mathematics

The effect of market segmentation with demand leakage between market segments on a firm’s price and inventory decisions. (English) Zbl 1121.90383
Summary: We address the simultaneous determination of price and inventory replenishment in a newsvendor setting when the firm faces demand from two or more market segments in which the firm can set different prices. We allow for demand leakage from higher-priced segments to lower-priced segments and assume that unsatisfied demand can be backlogged. We examine the case where the demands occur concurrently without priority and are met from a single inventory. We consider customer’s buy-down behavior explicitly by modeling demand leakage as a function of segment price differentiation, and characterize the structure of optimal inventory and pricing policies.

90B50 Management decision making, including multiple objectives
90B60 Marketing, advertising
Full Text: DOI
[1] Bassok, Y.; Anupindi, R.; Akella, R., Single-period multiproduct inventory models with substitution, Operations research, 47, 632-642, (1999) · Zbl 0979.90005
[2] Bell, P.C.; Chen, J., Enhancing revenues and profits for a multi-product firm with impatient customers through revenue management, Journal of the operational research society, 57, 4, 443-449, (2006) · Zbl 1086.90505
[3] Bell, P.C.; Zhang, M., Management decision-making in the single period optimum pricing problem, Journal of the operational research society, 57, 4, 377-388, (2006) · Zbl 1086.90522
[4] Belobaba, P.P.; Weatherford, L.R., Comparing decision rules that incorporate customer diversion in perishable asset revenue management situations, Decision science, 27, 343-357, (1996)
[5] Brumelle, S.L.; McGill, J.; Oum, H.; Sawaki, K.; Tretheway, W., Allocation of airline seats between stochastically dependent demands, Transportation science, 24, 183-192, (1990)
[6] Chang, P.; Lin, C., On the effects of centralization on expected costs in a multi-location newsboy problem, Journal of operational research society, 42, 1025-1030, (1991) · Zbl 0736.90025
[7] Eppen, G., Effects of centralization on expected costs in a multi-location newsboy problem, Management science, 25, 498-501, (1979) · Zbl 0419.90049
[8] Gerchak, Y.; Parlar, M.; Yee, M., Optimal rationing policies and production quantities for products with several demand classes, Canadian journal of administrative science, 2, 161-176, (1985)
[9] Gerstner, E.; Holthausen, D., Profitable pricing when market segments overlap, Marketing science, 5, 55-69, (1986)
[10] Ismail, B.; Louderback, J., Optimizing and satisfying in stochastic cost-volume-profit analysis, Decision science, 10, 205-217, (1979)
[11] Kabak, I.; Weinberg, C., The generalized newsboy problem, contract negotiations and secondary vendors, IIE transactions, 4, 154-157, (1972)
[12] Khouja, M., Optimal ordering, discounting, and pricing in the single-period problem, International journal of production economics, 65, 201-216, (2000)
[13] Khouja, M., The single-period (news-vendor) problem: literature review and suggestions for future research, Omega, 27, 537-553, (1999)
[14] La Croix, J., Marketing, price discrimination, and welfare, Southern economic journal, 49, 847-852, (1983)
[15] Lau, A.; Lau, H., The newsboy problem with price-dependent demand distribution, IIE transaction, 20, 168-175, (1988)
[16] Lee, C.; Hersh, M., A model for dynamic airline seat inventory control with multiple seat bookings, Transportation science, 27, 252-263, (1993)
[17] Lovell, K.; Wertz, I., Price discrimination in related markets, Economic inquiry, 19, 488-494, (1981)
[18] Nahmias, S., Production and operations management, (1996), Irwin Boston, MA
[19] Petruzzi, N.; Dada, M., Pricing and the newsvendor problem: A review with extensions, Operations research, 47, 183-194, (1999) · Zbl 1005.90546
[20] Pfeifer, P., The airline discount fare allocation problem, Decision science, 20, 149-157, (1989)
[21] Sen, A.; Zhang, A., The newsboy problem with multiple demand classes, IIE transactions, 31, 431-444, (1999)
[22] Smith, B.C.; Leimkuhler, J.F.; Darrow, R.M., Yield management at American airlines, Interfaces, 22, 1, 8-31, (1992)
[23] Talluri, K.; van Ryzin, G., Management under a general discrete choice model of consumer behavior, Management science, 50, 15-33, (2004) · Zbl 1168.91427
[24] Weatherford, R.; Bodily, E., A taxonomy and research overview of perishable-asset revenue management: yield management, overbooking and pricing, Operations research, 40, 831-844, (1992)
[25] Whitin, T., Inventory control and price theory, Management science, 2, 61-68, (1955)
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.