First Degree Price Discrimination and Profit Maximization

White, Daniel L.; Walker, Michael C.

doi:10.2307/1056882

Cited by 4 publications

(3 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…We analyze first-degree (perfect) price discrimination, where different prices may be given to every customer, which has received little attention in the literature. To the best of our knowledge, Spulber [38] and White and Walker [41] are the only two papers that analyze perfect price discrimination in detail. In [38], the author analyzes a model where a group of firms that implement perfect price discrimination select their output levels simultaneously.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The author shows the existence of a unique non cooperative equilibrium in output levels in a setting where the firms sell directly to the end customers and no sales promotions are considered. In [41], the authors analyze the case where there is a variable cost associated with perfect price discrimination. The authors propose a model where perfect price discrimination is selectively practiced only on one portion of the linear demand function.…”

Section: Literature Reviewmentioning

confidence: 99%

“…They analyze only one firm's sales quantity decision, where the firm sells directly to the end customers. Our work differs from [41] in that we analyze promotional decisions in addition to sales quantity decision, and we consider a two-stage supply chain rather than a single stage. We also compare the results to when the retailer implements fixed pricing and third-degree price discrimination.…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

The effects of customer rebates and retailer incentives on a manufacturer's profits and sales

Demirag

Baysar

Keskinocak

et al. 2009

Naval Research Logistics

View full text Add to dashboard Cite

Abstract:In some industries such as automotive, production costs are largely fixed and therefore maximizing revenue is the main objective. Manufacturers use promotions directed to the end customers and/or retailers in their distribution channels to increase sales and market share. We study a game theoretical model to examine the impact of "retailer incentive" and "customer rebate" promotions on the manufacturer's pricing and the retailer's ordering/sales decisions. The main tradeoff is that customer rebates are given to every customer, while the use of retailer incentives is controlled by the retailer. We consider several models with different demand characteristics and information asymmetry between the manufacturer and a price discriminating retailer, and we determine which promotion would benefit the manufacturer under which market conditions. When demand is deterministic, we find that retailer incentives increase the manufacturer's profits (and sales) while customer rebates do not unless they lead to market expansion. When the uncertainty in demand ("market potential") is high, a customer rebate can be more profitable than the retailer incentive for the manufacturer. With numerical examples, we provide additional insights on the profit gains by the right choice of promotion.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation