Price and Order Postponement in a Decentralized Newsvendor Model with Multiplicative and Price-Dependent Demand

Granot, Daniel; Yin, Shuya

doi:10.1287/opre.1070.0430

Cited by 92 publications

(69 citation statements)

References 25 publications

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“…In Granot and Yin (2005, 2007, the authors study different types of contracts in a Stackelberg framework using a price-setting newsvendor model. In particular, Granot and Yin (2008) analyze the effect of price and order postponements in a decentralized newsvendor model with multiplicative demand, wherein the manufacturer possibly offers a buyback rate. In our setting, the government and the supplier are acting independently and could perhaps adversely affect one another.…”

Section: Literature Reviewmentioning

confidence: 99%

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

2014

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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: Literature Reviewmentioning

confidence: 99%

“…In this section, we consider a demand with a multiplicative noise (see for example, Granot and Yin (2008)). The nominal deterministic part is assumed to be a function of the effective price, denoted by y(z):…”

Section: Multiplicative Noisementioning

confidence: 99%

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

2014

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“…Daniel Granot etc. [19] analyzed the effect of price and order postponement in a decentralized newsvendor mode with multiplicative and price-dependent demand, while we build a decentralized newsvendor model with additive and price-dependent demand. Furthermore, they show the optimal policy in a buyback contract, but we will choose the wholesale contract.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Note that the N-postponement model with a linear expected demand function under a wholesale price-only contract has been studied by Granot and Yin [19]. However, note that for a general distribution of ε, the supplier's expected profit function in stage 1, taking into account the retailer's reaction function of (P * , S * ) may not be well behaved.…”

Section: No Postponementmentioning

confidence: 99%

Price Postponement in a Decentralized Newsvendor Model under Uncertain Supply and Demand

Zhang¹,

Xu²

2017

dtssehs

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Abstract. With the rise of global procurement, economic globalization, on the one hand, promotes the development of supply chain; on the other hand it also increases the risk of supply chain, which makes the supply increasingly uncertain. According to the newsvendor model, we analyze the effect of price postponement in a decentralized newsvendor model with additive and price-dependent demand, wherein the supplier sets the wholesale price, and the retailer determines the order quantity and retail price. Such postponement strategies can be used by the retailer by delaying his retail price until after supply and demand uncertainties are observed. This research demonstrates the existence and uniqueness of the optimal order quantity of the retailer. We further shows that retailer adopts the price postponement strategy can reduce market uncertainty risk for retailers under the price dependent stochastic demand and uncertain supply by numerical simulation. At the same time, with the increase of the supplier's production cost, the selling price (or expected price) will increase, order quantity will decrease, and the expected profit of the supplier and retailer will decrease under pricing postponement model.

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“…That is, M and R delay their decisions about the values of decision variables under their control until the counterpart commits to a decision variable under their control. However, in the various postponement strategies, which were extensively studied in the operations research/operations management literature (e.g., Lee and Tang (1997), Aviv and Federgruen (2001), van Mieghem and Dada (1999), and Granot and Yin (2004b)), the decision makers delay some operational decisions (e.g., production or pricing) until additional information, usually about demand, is obtained. In our sequential commitment approach, all decisions are made before demand uncertainty is resolved.…”

Section: Introductionmentioning

confidence: 99%

On sequential commitment in the price-dependent newsvendor model

Granot

Yin

2007

European Journal of Operational Research

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We investigate the effect of sequential commitment in the decentralized newsvendor model with price-dependent demand. Sequential commitment allows the self-profit maximizing parties to commit to contract parameters (e.g., wholesale price, retail price, buyback price and order quantity) sequentially and alternately, and we investigate its effect on the equilibrium profits of the channel and its members. Sequential commitment introduces more flexibility to contracting in the supply chain and our analysis can provide some insight to channel members who follow a bargaining process to determine the values of contract parameters. We show that the introduction of sequential commitment to the price-dependent (PD) newsvendor model with buybacks can significantly improve the manufacturer's and the channel expected profits, but it can also decrease the retailer's expected profit. Finally, we demonstrate that with sequential commitment, under some conditions, the choice of the first mover is endogenized and we identify the unique sequence of commitments by channel members that would arise in equilibrium.

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Price and Order Postponement in a Decentralized Newsvendor Model with Multiplicative and Price-Dependent Demand

Cited by 92 publications

References 25 publications

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

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

Price Postponement in a Decentralized Newsvendor Model under Uncertain Supply and Demand

On sequential commitment in the price-dependent newsvendor model

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