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Author: alan g. kalton, medini r. singh
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Author: alan g. kalton, medini r. singh
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Author: K. Sudhir
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Consumer goods manufacturers usually sell their brands to consumers through common independent retailers. Theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer-retailer interaction (Vertical Strategic Interaction). Research in the Empirical Industrial Organization has focused on analyzing the competitive interactions between manufacturers (Horizontal Strategic Interaction). Decision Support Systems have made various assumptions about retailer pricing rules (e.g., constant markup, category profit maximization). The appropriateness of such assumptions about strategic behavior for any specific market however is an empirical question. This paper therefore empirically infers: (1) The Vertical Strategic Interaction (VSI) between manufacturers and retailer (2) The Horizontal Strategic Interaction (HSI) between manufacturers simultaneously with the VSI; (3) The pricing rule used by a retailer The approach is particularly appealing because it can be used with widely available scanner data, where there is no information on wholesale prices. Researchers usually have no access to wholesale prices. Even manufacturers, who have access to their own wholesale prices, usually have limited information on competitors' wholesale prices. In the absence of wholesale prices, we derive formulae for wholesale prices using game theoretic solution techniques under the specific assumptions of vertical and horizontal strategic interaction and retailer pricing rules. We then embed the formulae for wholesale prices into the estimation equations. While our empirical illustration is using scanner data without wholesale prices, the model itself can be applied when wholesale prices are available. Early research on the inference of HSI among manufacturers in setting wholesale prices using scanner data (for e.g., Kadiyali, Vilcassim and Chintagunta, 1996, 1999) made the simplifying assumption that retailers charge a constant margin. This assumption enabled them to infer wholesale prices and analyze competitive interactions between manufacturers. In this paper, we show that this model is econometrically identical to a model that measures retail price coordination across brands. Hence the inferred cooperation among manufacturers could be exaggerated by the coordinated pricing (category management) done by the retailer. We find empirical support for this argument. This highlights the need to properly model and infer VSI simultaneously to accurately estimate the HSI when using data at the retail level. Functional forms of demand have been evaluated in terms of the fit of the model to sales data. But recent theoretical research on channels (Lee and Staelin, 1997; Tyagi, 1999) has shown that the functional form has serious implications for strategic behavior such as retail pass-through. While the logit and linear model implies equilibrium passthrough of less than 100% (Lee and Staelin call this Vertical Strategic Substitute (VSS)), the multiplicative model implies optimal passthrough of greater than 100% (Vertical Strategic Complement (VSC)). Since passthrough rates on promotions have been found to be below or above 100% (Chevalier and Curhan 1976; Armstrong 1991), we empirically test the appropriateness of the logit (VSS) and the multiplicative (VSC) functional form for the data. We perform our analysis in the yogurt and peanut butter categories for the two biggest stores in a local market. We found that the VSS implications of the logit fit the data better than the multiplicative model. We also find that for both categories, the best fitting model is one in which: (1) the retailer maximizes category profits (2) the VSI is Manufacturer-Stackelberg and (3) manufacturer pricing (HSI) is tacitly collusive. The fact that the retailer maximizes category profits is consistent with theoretical expectations. The inference that the VSI is Manufacturer-Stackelberg reflects the institutional reality of the timing of the game. Retailers set their retail prices after manufacturers set their wholesale prices. Note that in the stores and product categories that we analyze, the two manufacturers own the dominant brands with combined market shares of about 82% in the yogurt market and 65% in the peanut butter market. The result is also consistent with a balance of power argument in the literature. The finding that manufacturer pricing is tacitly collusive is consistent with the argument that firms involved in long-term competition in concentrated markets can achieve tacit collusion. Managers use decision support systems (DSS) for promotion planning that routinely make assumptions about VSI, HSI and the functional form. The results from our analysis are of substantive import in judging the appropriateness of assumptions made in such DSS.
Author: Justin Michael Pavlin
Publisher:
ISBN: 9780494975695
Category :
Languages : en
Pages :
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Author: Shengqiu Zhang
Publisher: Open Dissertation Press
ISBN: 9781361371039
Category :
Languages : en
Pages :
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This dissertation, "Dynamic Pricing Strategies for New Products With Extended Warranty Contracts" by Shengqiu, Zhang, 张盛球, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: An extended warranty provides consumers the opportunity to rectify product failures at little or no cost after the expiry of the base warranty. Empirical evidence has shown that the selling of extended warranty contract (EWC) has become a profitable business in many manufacturing and retail industries. This thesis investigates the dynamic pricing problem for a new product with the option of purchasing an extended warranty contract (EWC). The research simultaneously determines the pricing strategies for both the product and the associated EWC, and the production rate to maximize the manufacturer's long-term total profit. The results show that the provision of EWC will significantly affect the optimal pricing strategy for the new product, and may also affect its optimal production plan. The research establishes three mathematical models for making optimal pricing decisions under different operational settings. The first model considers a centralized selling system in which the manufacturer sells the product and offers the associated EWC to the consumer directly. The second model extends the first one by incorporating the production and inventory decisions in the analysis. The third model considers a decentralized system in which the manufacturer sells the new product to consumers through an independent retailer. The EWC can be offered either by the manufacturer or by the retailer. It is shown that each scenario leads to a differential Stackelberg game in which the manufacturer and the retailer are players. For the first model, the Pontryagin maximum principle is used to derive the necessary condition for the optimal pricing strategies for both the new product and the associated EWC. Some properties for pricing the new product optimally are then studied. Apart from analysing the characteristics of the optimal pricing strategy under general demand conditions, closed-form solutions for the problem are also derived for some specific demand functions. In cases where closed-form solutions cannot be found, a gradient algorithm is applied to solve the problem numerically. In the second model, the production rate becomes a decision variable because the unit production cost depends on the chosen production rate. Results of the analysis show that the optimal selling price for the EWC remains the same as that in the first model, while the optimal selling price for the new product are affected by the production rate. The results also show that the gradient algorithm fails to converge, thus is no longer suitable for the second model due to the complexity caused by the boundary conditions. A more robust control vector parameterization method is then developed to compute the numerical solution. Analysing the third model theoretically indicates that some necessary conditions related to the optimal wholesale price and the optimal retail price must be satisfied for the existence of an open-loop Stackelberg equilibrium. Some important managerial insights are derived on the basis of the properties characterizing the optimal solution. The control vector parameterization method is then further developed to solve the differential game problem. Numerical experiments are then carried out to demonstrate which distribution channel results in the largest profit. DOI: 10.5353/th_b5435661 Subjects: Warranty Pricing
Author: Özalp Özer
Publisher: OUP Oxford
ISBN: 0191634271
Category : Business & Economics
Languages : en
Pages : 976
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Book Description
The Oxford Handbook of Pricing Management is a comprehensive guide to the theory and practice of pricing across industries, environments, and methodologies. The Handbook illustrates the wide variety of pricing approaches that are used in different industries. It also covers the diverse range of methodologies that are needed to support pricing decisions across these different industries. It includes more than 30 chapters written by pricing leaders from industry, consulting, and academia. It explains how pricing is actually performed in a range of industries, from airlines and internet advertising to electric power and health care. The volume covers the fundamental principles of pricing, such as price theory in economics, models of consumer demand, game theory, and behavioural issues in pricing, as well as specific pricing tactics such as customized pricing, nonlinear pricing, dynamic pricing, sales promotions, markdown management, revenue management, and auction pricing. In addition, there are articles on the key issues involved in structuring and managing a pricing organization, setting a global pricing strategy, and pricing in business-to-business settings.
Author: Daniel Duffy
Publisher:
ISBN:
Category : Liquor laws
Languages : en
Pages : 1
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Discusses how and why federal law requires the liquor industry to be divided into three separate tiers for manufacturing, wholesaling, and retailing.
Author: Sourav Ray
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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We examine how retailers discount the prices of product systems versus their constituent components. The topic is important because such systems are ubiquitous in our daily lives. In particular, many high-tech markets revolve around complex multi-component systems - e.g. a camera system consists of a camera body, a lens, a flash, and other components; a computer system consists of a central processing unit, a monitor, a keyboard, a mouse, etc. An important structural feature characterizing different systems markets is the degree of component interoperability. This affects the range of systems and component products available for sale and the possibilities of inter-brand mixing and matching of components within a system. We explain how these differences influence price discounts which are a widely used retail tactic to generate customer attention, drive store traffic and boost sales. In some markets, retailers discount system prices more than component prices, while in other markets, retailers discount component prices more than system prices. This relative price discounting of systems versus components hinges on whether the systems markets are loosely or tightly coupled. In loosely coupled systems markets, consumers can choose from an array of diverse components (and brands) to include within a system leading to a high degree of mix and match (e.g. computers). In tightly coupled systems markets, in contrast, the components are often pre-combined as a complete system for the consumer, and there is far less choice of mixing and matching of components and brands (e.g. cameras). Critically, this distinction leads to different levels of consumer familiarity and knowledge of prices within each type of systems market and to differing degrees of effort needed on the part of consumers to attend to price changes and reassess their consumption choices. This underlies differences in consumers' rational inattention to price changes across different systems markets. We contend these differing degrees of consumer inattention give rise to different patterns of downwards price rigidity across different systems markets by influencing the desired price cuts. We find empirical evidence consistent with our ideas by examining price cuts in systems and components in an e-commerce context using a dataset consisting of 669,557 daily price listings for 1,052 different high-end cameras and computers from 102 online vendors. Using a second dataset comprising number of webpage visits, we also find our predicted pricing behavior is aligned with greater consumer attention for the firm. Our key findings suggest that managers interested in building attention and market share should use smaller price discounts for systems (than for components) in tightly coupled markets like cameras. On the other hand, they should use larger price discounts for systems (than for components) in loosely coupled markets like computers. To the best of our knowledge, this is the first paper to examine price reductions in multi-component systems markets. Our conceptual framework has implications worthy of further investigation in the areas of store merchandising, advertising and inventory management strategies in these markets. Such further studies would help bring research attention more in line with the importance of the topic.
Author: Erlend Alfnes
Publisher: Springer Nature
ISBN: 3031436709
Category : Computers
Languages : en
Pages : 872
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Book Description
This 4-volume set, IFIP AICT 689-692, constitutes the refereed proceedings of the International IFIP WG 5.7 Conference on Advances in Production Management Systems, APMS 2023, held in Trondheim, Norway, during September 17–21, 2023. The 213 full papers presented in these volumes were carefully reviewed and selected from a total of 224 submissions. They were organized in topical sections as follows: Part I : Lean Management in the Industry 4.0 Era; Crossroads and Paradoxes in the Digital Lean Manufacturing World; Digital Transformation Approaches in Production Management; Managing Digitalization of Production Systems; Workforce Evolutionary Pathways in Smart Manufacturing Systems; Next Generation Human-Centered Manufacturing and Logistics Systems for the Operator 5.0; and SME 5.0: Exploring Pathways to the Next Level of Intelligent, Sustainable, and Human-Centered SMEs. Part II : Digitally Enabled and Sustainable Service and Operations Management in PSS Lifecycle; Exploring Digital Servitization in Manufacturing; Everything-as-a-Service (XaaS) Business Models in the Manufacturing Industry; Digital Twin Concepts in Production and Services; Experiential Learning in Engineering Education; Lean in Healthcare; Additive Manufacturing in Operations and Supply Chain Management; and Applications of Artificial Intelligence in Manufacturing. Part III : Towards Next-Generation Production and SCM in Yard and Construction Industries; Transforming Engineer-to-Order Projects, Supply Chains and Ecosystems; Modelling Supply Chain and Production Systems; Advances in Dynamic Scheduling Technologies for Smart Manufacturing; and Smart Production Planning and Control. Part IV : Circular Manufacturing and Industrial Eco-Efficiency; Smart Manufacturing to Support Circular Economy; Product Information Management and Extended Producer Responsibility; Product and Asset Life Cycle Management for Sustainable and Resilient Manufacturing Systems; Sustainable Mass Customization in the Era of Industry 5.0; Food and Bio-Manufacturing; Battery Production Development and Management; Operations and SCM in Energy-Intensive Production for a Sustainable Future; and Resilience Management in Supply Chains.
Author: Huanhuan Qi
Publisher:
ISBN:
Category :
Languages : en
Pages : 78
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This dissertation is concerned with pricing issues facing manufacturers when retailers offer periodic discounts and customers stockpile in response. Chapter 1 provides an overview of the dissertation. In Chapter 2, we study a new Pareto-improving pricing scheme in which the manufacturer subsidizes the retailer's setup (transportation) cost in exchange for a (possibly) higher wholesale price. The retailer responds by choosing regular and discount prices and his order frequency to maximize his revenue less setup, purchasing and inventory holding costs, considering the customers' response. There are two customer segments that differ in their reservation prices and inventory holding costs. Customers make purchasing (including stockpiling) decisions to maximize their utility from consumption less purchasing and inventory holding costs. We characterize the retailer's optimal response to the manufacturer's pricing decisions and the consumers' response to the retailer's pricing schemes. We then show how to solve the manufacturer's decision problem in view of the downstream responses. In Chapter 3, we investigate the retailer's pass--through of manufacturer trade discounts. The manufacturer offers a fixed wholesale price and periodic trade discounts. The retailer optimizes his ordering plan (including stockpiling when a trade discount is offered) and the pattern of discounts to offer to customers, seeking to maximize revenue less setup, purchasing and inventory holding costs. Customers differ in their reservation prices, and in our model, we account for the adverse effect of retail discounts on consumers' reservation prices. For a given frequency and depth of the manufacturer's trade discount, we characterize the retailer's optimal discounting pattern for a given ordering schedule that spans the time between the manufacturer's trade discount offers. We solve for the retailer's jointly optimal ordering and discounting patterns by enumerating appropriate ordering schedules and optimizing the retailer's discount pattern for each. For the models in Chapters 2 and 3, we also perform associated numerical studies which, together with our analytical results, provide insight into how both manufacturers and retailers should make decisions in these problem settings, and circumstances in which various policies are most effective in increasing profit. Chapter 4 concludes the dissertation with a summary of contributions and key findings.
Author: Yuefeng Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Strategic inventory plays a vital role in a manufacturer-retailer dynamic contract. By holding inventories in a period, the retailer curtails the manufacturer's pricing power in the next period and alleviates double marginalization, significantly increasing the manufacturer's and retailer's profits and improving consumer surplus. The retailer's strategic inventory stems from strategic consideration (dynamic games) regardless of uncertainties, fluctuations, capacities, etc. In this paper, we investigate how consumers' strategic inventory (i.e., consumer stockpiling) alters the retailer's strategic inventory as well as the subgame perfect equilibrium. We extend the model of Anand et al. (2008) by adding Buy-One-Get-One (BOGO) promotions in the first period. We show that the retailer has a strong motive to transfer inventory to consumers. Our results hold if consumers are myopic or strategic and anticipate the price in the second period. We also examine our results in a multi-period model over a finite horizon. To compare BOGO to cash-mail-in rebates, we study a manufacturer-to-consumer BOGO in such a dynamic contract. The result reveals that, unlike rebates, the manufacturer does not offer BOGO to consumers but the retailer does, implying that the pricing scheme with BOGO differs from rebates. Finally, we extend our base model to three production cost structures: (1) fixed setup cost; (2) diseconomies of scale; and (3) production cost savings, and find that the cost structure has a significant impact on the optimal supply chain inventory and BOGO promotions decisions.
