Effects of a demand-curve’s shape on the optimal solutions of a multi-echelon inventory/pricing model

Lau, Amy Hing‐Ling; Lau, Hon‐Shiang

doi:10.1016/s0377-2217(02)00291-6

Cited by 168 publications

(78 citation statements)

References 15 publications

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“…For more details, see for example Huang et al (2013). Various papers in oligopoly competition consider iso-elastic demand (see, e.g., Lau andLau (2003), Beard (2013) and Puu (1991)). In Puu (1991), the authors study the dynamics of two competing firms in a market in terms of Cournot's duopoly theory.…”

Section: Multiplicative Noisementioning

confidence: 99%

“…In Puu (1991), the authors study the dynamics of two competing firms in a market in terms of Cournot's duopoly theory. In Lau and Lau (2003), the authors consider (among others) an iso-elastic demand in a a multi-echelon inventory/pricing setting and show that the results might differ depending on the demand shape. Another application that uses iso-elastic demands relates to commodity pricing (see, e.g., Deaton and Laroque (1992)).…”

Section: Multiplicative Noisementioning

confidence: 99%

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The Impact of Demand Uncertainty on Consumer Subsidies for Green Technology Adoption

2016

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This paper studies government subsidies for green technology adoption while considering the manufacturing industry's response. Government subsidies offered directly to consumers impact the supplier's production and pricing decisions. Our analysis expands the current understanding of the price-setting newsvendor model, incorporating the external influence from the government who is now an additional player in the system. We quantify how demand uncertainty impacts the various players (government, industry and consumers) when designing policies. We further show that for convex demand functions, an increase in demand uncertainty leads to higher production quantities and lower prices, resulting in lower profits for the supplier. With this in mind, one could expect consumer surplus to increase with uncertainty. In fact, we show this is not always the case and the uncertainty impact on consumer surplus depends on the trade-off between lower prices and the possibility of under-serving customers with high valuations. We also show that when policy makers such as governments ignore demand uncertainty when designing consumer subsidies, they can significantly miss the desired adoption target level. From a coordination perspective, we demonstrate that the decentralized decisions are also optimal for a central planner managing jointly the supplier and the government. As a result, subsidies provide a coordination mechanism.

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Section: Multiplicative Noisementioning

confidence: 99%

Section: Multiplicative Noisementioning

confidence: 99%

The Impact of Demand Uncertainty on Consumer Subsidies for Green Technology Adoption

2016

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“…However, the numerical analyses in many studies are conducted limitedly based upon lineardemand functions due to their simple properties (e.g., Cheng, 1990;Kunreuther and Richard, 1971;Whitin, 1955). As Lau and Lau (2003) indicate, the demand curve in practice is seldom linear but more often isoelastic, and different demand curves would generate different results even in a single firm, one-echelon environment. Thus, we use a demand function of constant price elasticity (iso-elasticity).…”

Section: Research Contributionmentioning

confidence: 99%

On the Optimality of the Multi-Product EOQ Model with Pricing Consideration

Shin¹,

Park²

2012

Management Science and Financial Engineering

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Two previous studies that attempted to generalize the deterministic joint pricing-inventory decision model are reevaluated. We prove analytically that even in a single-product environment, the EOQ model with constant priceelastic demand cannot find optimal solutions unless two optimality conditions associated with price elasticity and demand magnitude are satisfied. Due to the inexistence of the general optimality for the problem, demand function and price elasticity must be evaluated and bounded properly to use the methods proposed in the previous studies.

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“…The general observation is that the higher sales price results low sales quantity and vice versa, provided the reputation and history of the company or brand value have no greater impact on the customers and/or there is at least one stiff customer (local or global) to control the sales price. Taking into account the above for consideration, the relationship between 'P(y j )' and 'y j ' may be assumed to behave linearly (Lau & Lau, 2003) and is given as: P(y j ) = a j -b j y j (1)…”

Section: Model Parametersmentioning

confidence: 99%