zbMATH — the first resource for mathematics

Optimal fences and joint price and inventory decisions in distinct markets with demand leakage. (English) Zbl 1181.90029
Summary: This paper evaluates the simultaneous determination of price and inventory replenishment when a firm faces demand from distinct market segments. A firm utilizes fences, such as advance or nonrefundable payment, to maintain separation of its market segments; however, fences are imperfect and allow a degree of demand leakage from the higher-priced to the lower-priced market segment. We investigate the optimal structure of joint price and inventory decisions with fencing, and demonstrate that more segments is not necessarily better, especially when demand uncertainty is high in the presence of lost sales. We also show the impact of imperfect fences on the firm’s profitability, and evaluate how fencing costs affect the optimal fencing decision.

90B05 Inventory, storage, reservoirs
PDF BibTeX Cite
Full Text: DOI
[1] Bell, P.C., 1998. Revenue management: That’s the ticket. OR/MS Today.
[2] Bell, P.C.; Chen, J., Cutting costs or enhancing revenues? an example of a multi-product firm with impatient customers illustrates an important choice facing operational researchers, Journal of the operational research society, 57, 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, 443-449, (2006) · Zbl 1086.90522
[4] Belobaba, P.; Weatherford, L., Comparing decision rules that incorporate customer diversion in perishable asset revenue management situations, Decision science, 27, 343-357, (1996)
[5] Brumelle, S.; McGill, J.; Oum, T.; Sawaki, K.; Tretheway, M., Allocation of airline seats between stochastically dependent demands, Transportation science, 24, 183-192, (1990)
[6] Chiang, W.K.; Monahan, G.E., Managing inventories in a two-echelon dual-channel supply chain, European journal of operational research, 162, 2, 325-341, (2005) · Zbl 1071.90503
[7] Choi, S.C., Pricing competition in a duopoly common retailer channel, Journal of retailing, 72, 2, 117-134, (1996)
[8] Chung, C.S.; Flynn, J.; Kirca, O., A multi-item newsvendor problem with preseason production and capacitated reactive production, European journal of operational research, 188, 3, 775-792, (2008) · Zbl 1144.90364
[9] Chung, C.S.; Flynn, J.; Zhu, J., The newsvendor problem with an in-season price adjustment, European journal of operational research, 198, 1, 148-156, (2009) · Zbl 1163.90323
[10] Dumrongsiri, A.; Fan, M.; Jain, A.; Moinzadeh, K., A supply chain model with direct and retail channels, European journal of operational research, 187, 3, 691-718, (2008) · Zbl 1137.91388
[11] Gerchak, Y.; Parlar, M.; Yee, T.K.M., Optimal rationing policies and production quantities for products with several demand classes, Canadian journal of administrative science, 2, 161-176, (1985)
[12] Grubbström, R.W., in press. The newsboy problem when customer demand is a compound renewal process. European Journal of Operational Research.
[13] Hanks, R.; Cross, R.; Noland, P., Discounting in the hotel industry, Cornell hotel and restaurant administration quarterly, 43, 94-103, (2002)
[14] Ingene, C.A.; Parry, M.E., Mathematical models of distribution channels, (2004), Springer
[15] Khouja, M., The single-period (news-vendor) problem: literature review and suggestions for future research, Omega, 27, 537-553, (1999)
[16] Kimes, S.E., Perceived fairness of yield management, Cornell hotel and restaurant administration quarterly, 43, 21-30, (2002)
[17] Lau, A.; Lau, H., The newsboy problem with price-dependent demand distribution, IIE transactions, 20, 168-175, (1988)
[18] Lee, T.; Hersh, M., A model for dynamic airline seat inventory control with multiple seat bookings, Transportation science, 27, 252-263, (1993)
[19] Mills, E., Uncertainty and price theory, The quarterly journal of economics, 73, 116-130, (1959)
[20] Özer, O.; Uncu, O.; Wei, W., Selling to the “newsvendor” with a forecast update: analysis of a dual purchase contract, European journal of operational research, 182, 3, 1150-1176, (2007) · Zbl 1128.90531
[21] Petruzzi, N.; Dada, M., Pricing and the newsvendor problem: A review with extensions, Operations research, 47, 183-194, (1999) · Zbl 1005.90546
[22] Pfeifer, P., The airline discount fare allocation problem, Decision science, 20, 149-157, (1989)
[23] Sahin, E.; Dallery, Y., Assessing the impact of inventory inaccuracies within a newsvendor framework, European journal of operational research, 197, 3, 1108-1118, (2009)
[24] Sahin, E.; Buzacott, J.; Dallery, Y., Analysis of a newsvendor which has errors in inventory data records, European journal of operational research, 188, 2, 370-389, (2008) · Zbl 1149.90307
[25] SAP White Paper, 2005. <http://whitepapers.sapinsideronline.com/>.
[26] Sen, A.; Zhang, A., The newsboy problem with multiple demand classes, IIE transactions, 31, 431-444, (1999)
[27] Talluri, K.; van Ryzin, G., Revenue management under a general discrete choice model of consumer behavior, Management science, 50, 15-33, (2004) · Zbl 1168.91427
[28] Talluri, K.; van Ryzin, G., The theory and practice of revenue management, (2005), Springer Science Business Media, Inc.
[29] Wang, C.X.; Webster, S.; Suresh, N.C., Would a risk-averse newsvendor order less at a higher selling price?, European journal of operational research, 196, 2, 544-553, (2009) · Zbl 1163.90568
[30] Weatherford, L., Using pricing more realistically as decision variables in perishable-asset revenue management problems, Journal of combinatorial optimization, 1, 277-304, (1997) · Zbl 0895.90129
[31] Whitin, T., Inventory control and price theory, Management science, 2, 61-68, (1955)
[32] Winston, W.L., Operations research, (2004), Thompson
[33] Zhang, M.; Bell, P.C., The effect of market segmentation with demand leakage between market segments on a firm’s price and inventory decisions, European journal of operational research, 182, 738-754, (2007) · Zbl 1121.90383
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.