Coordinated Lot-sizing and Dynamic Prizing under a Supplier All-units Quantity Discount

We consider an economic order quantity model where the supplier offers an all-units quantitydiscount and a price sensitive customer demand. We compare a decentralized decision frameworkwhere selling price and replenishment policy are determined independently to simultaneous decisionmaking. Constant and dynamic pricing are distinguished. We derive structural properties and developalgorithms that determine the optimal pricing and replenishment policy and show how quantitydiscounts not only influence the purchasing strategy but also the pricing policy. A sensitivity analysisindicates the impact of the fixed-holding cost ratio, the discount policy, and the customers' pricesensitivity on the optimal decisions.

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Authors:	Transchel, Sandra ; Minner, Stefan
Institutions:	Verband der Hochschullehrer für Betriebswirtschaft
Published in:	BuR - Business Research BuR ; Volume 1, Issue 1, May 2008, p. 125-141
Subject:	Preisbildung \| pricing \| Vertriebsorganisation \| Mengenrabatt \| Quantity-Discount \| Bestellmenge

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1 Introduction
2 Literature review
3 Model
3.1 Assumptions
3.2 Decentralized decisions
3.3 Coordinated-constant decision
3.4 Coordinated-dynamic decision
4 Linear price-response function
5 Numerical example
6 Conclusion
References
Biographies

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