Managing production of high-tech products with high production quality variability

We consider production systems in technology industries where output quality of a single production run has a large variance. Firms operating such systems classify products into different quality bins and sell units in one bin at the same tagged quality level and the same price. Consumers have heterogeneous quality preferences and choose that quality that maximises their net utility. We examine firms’ assortment, production and pricing problem. We present a three-stage solution procedure that optimises the production quantity, quality specification and number of bins. In that regard, we show that for a manufacturing technology with known quality distribution and known distribution of customers’ quality preference, the optimal assortment and production quantity are set such that on average, the demand of each bin is exactly fulfilled. We examine the impact of an improved manufacturing technology, variation in consumer preferences and changing price premium on the optimal assortment, lot size, market share, yield loss and the overall profitability. We further show that when the quality distribution of the manufacturing process is unknown, downward substitution leads to product offering of higher quality and higher prices. Finally, we discuss practical considerations for pricing, technology and optimal product offerings, and explain the proliferation of bins witnessed in the last decade in the processor industry.     

存在盗版下信息产品的用户协同设计选择性研究

针对信息产品市场中是否存在盗版的情况，研究一个垄断正版厂商是否选择用户协同设计策略的问题。基于用户的个人理性和激励相容，依据厂商是否选择用户协同策略，分别建立信息产品市场中不存在盗版时的NS、NC模型与信息产品市场中存在盗版时的YS、YC模型。通过对模型结果进行比较分析发现：当厂商选择用户协同设计策略时，NC模型中厂商的利润始终高于YC模型中厂商的利润，且厂商的利润均随着用户协同设计努力水平的降低而降低；NC模型和YC模型中用户努力水平高低均与用户对正版产品的价值估值有关；最后，无论信息产品市场中是否存在盗版，厂商选择用户协同设计策略的市场占有率均低于厂商不选择用户协同设计策略的市场占有率。     

Myopic vs. far-sighted behaviours in a revenue-sharing supply chain with reference quality effects

In this paper, we consider a dynamic supply chain where a manufacturer produces and distributes a featured product through an exclusive retailer to end consumers. The manufacturer decides the product quality and wholesale price, while the retailer sets the retail price in the presence of a revenue-sharing contract and consumers’ reference quality effects. The objective of this study is to investigate the impacts of myopic behaviour regarding the reference quality on the product quality and pricing strategies and profits of both members. Our results suggest that the manufacturer’s myopia leads to a higher quality, higher price strategy and a higher quality–price ratio which benefits consumers. Meanwhile, relative to the far-sighted behaviour, myopia results in a more quality-sensitive but less price-sensitive market demand. What’s more, we find that the manufacturer is apt to act in a far-sighted way, but the retailer isn’t always willing to cooperate with a far-sighted manufacturer. Taking myopic strategies for both members is likely to gain a high profit of the whole supply chain for a relatively high marginal contribution of product quality on demand and a relatively low revenue-sharing proportion.     

Two strategies for dynamic perishable product pricing to consider in strategic consumer behaviour

The study investigates two dynamic pricing strategies, namely posterior price matching (PM) and delay posterior price matching (DPM). These strategies are used by sellers to consider consumer behaviour in a market with several types of consumers. We analyze reduction season price, purchasing equilibrium and regular selling season price using equilibrium theory and backward induction method. A comparison of these two strategies indicates that both PM and DPM enable sellers to increase price in a regular selling season. Hassle cost and valuation differences between high- and low-end consumers influence the profits and decisions of the seller. PM is the best choice when valuations of low- and high-end consumers vary significantly. When the strategic consumer delaying fraction is small, the advantages of PM are more evident than those of DPM. However, DPM is the best choice when the difference between the valuations of low- and high-end consumers is small, and the strategic consumer delaying fraction is large. An increase in hassle cost also affects the seller’s strategy choice and profits; this effect decreases as strategic consumer delaying fraction increases.     

供应商纵向持股对竞争性制造商定价策略的影响

研究供应商对制造商进行持股时,不同的市场结构与持股比例对竞争性制造商定价策略的影响。根据制造商市场地位的差异,构建双寡头领导者、被持股制造商为领导者与未被持股制造商为领导者3种持股模型,运用博弈论中的逆向归纳法求解各模型均衡产量,零售价格及最优利润。研究发现：1)被持股制造商的最优零售价格在自身强势时最高,在竞争对手强势时次之,未被持股制造商的产品价格同时受到持股比例与市场结构的影响;2)持股比例较大时,被持股制造商具有“先动优势”,持股比例较小时,具有“后动优势”,而未被持股制造商的“后动优势”与持股比例无关;3)供应链整体利润随持股比例的增加先升高后降低,社会福利与持股比例呈正相关。     

Price and lead time differentiation,capacity strategy and market competition

We study a duopoly market in which customers are heterogeneous, and can be segmented as price or time sensitive. Each firm tailors (differentiates) its products/services for the two customer classes solely based on guaranteed lead time and the corresponding price. Our objective is to understand how competition affects price and lead time differentiation of the firms in the presence of different operations strategy (shared versus dedicated capacity), product substitution and asymmetry between the competing firms. Our results suggest that when firms use dedicated resources to serve the two market segments, pure price competition always tends to decrease individual prices as well as price differentiation, irrespective of the market behaviour. Further, the effect of competition is more pronounced when customers are allowed to self-select, thereby introducing substitutability between the two product options. On the other hand, when firms compete in time, in addition to price, the effect of competition on product differentiation depends crucially on the behaviour of the market. Our results further suggest that the firm with a larger market base should always maintain a larger price and lead time differentiation between the two market segments. Similarly, the firm with a capacity cost advantage should also maintain a larger lead time differentiation.     

Joint product variety,pricing and scheduling decisions in a flexible facility

This paper studies a manufacturer’s optimal product variety, pricing and scheduling decisions in a single flexible production facility when customers have private information in their marginal valuations for product qualities. In addition to determining the product variety and price of each product, the manufacturer needs to optimise a detailed schedule of production (batch sizes and production sequences) to fully utilise the flexibility of this facility. To achieve the second-degree discrimination, the manufacturer provides multiple products and follows a priority rule in the production schedule. To obtain economies of scale, the manufacturer may offer a composite product targeting the whole population, or choose a dedicated product to serve a proportion of customers. Comparing these three production choices, we observe that the optimal product variety strategy is threshold controlled by the relative ratio of customer arrival rates, the relative difference between customers’ marginal valuations and the production technology.     

A newsvendor problem with boundedly rational strategic customers

This work considers a newsvendor system with strategic customers who are boundedly rational in terms of buying during the selling season or waiting for a discount in the savage market. The newsvendor’s decisions are to determine the selling price and order quantity. An optimisation problem is formulated with the incorporation of a game for interaction between strategic customers. We use the quantal choice framework to characterise the behaviour of strategic customers. It is shown that when the bounded rationality parameter is large, the quantal response equilibrium is unique; otherwise, multiple equilibria may exist. For the unique equilibrium case, it is not difficult to determine the optimal decisions for the newsvendor. For the multiple equilibria case, we give theoretical analyses and numerical calculations to provide implications to the newsvendor. Additionally, based on the special case (with perfectly rational strategic customers), some important results are also observed.     

Green product pricing decision analysis with application to personal computers

This paper focuses on the pricing of reused personal computers that are discarded and sold on the secondary market. We first extract the main components affecting the performance of a reused computer. We then use quality function deployment to compare the weights of the main components against what reusable computer customers require. Third, we use TOPSIS to rank the selected reused computers. Finally, we price every reused computer according to relative monopoly power and perform an accumulated depreciation analysis on each one at various sale periods. The results show that each reused computer can be easily evaluated and priced on the secondary market.     

Competing with customer returns policies

Return of products purchased by customers is a common phenomenon in the retail industry and results in costs to retailers. In practice, most retailers implement a full-refund policy, but the terms of customer returns policies vary. A customer returns policy serves as a post-customer service, and is a determinant factor in the customer’s decision to purchase the product, in addition to other factors, such as the price of the product. In this paper, for competing retailers who face customer returns, competition from multiple retailers and uncertain customer valuations of the product, we develop a model to examine when retailers can survive and what pricing strategy they should implement in a competitive market. We identify the co-existence conditions for multiple retailers and the existence conditions of a Nash equilibrium among competing retailers. We also show the impact of customer returns on the retailers’ pricing and market share, as well as on profits in a competitive market. Numerical examples are included to illustrate the major results discussed in the paper.     

Strategically decentralise when encroaching on a dominant supplier

A manufacturer may encroach on his suppliers by developing substitutable components. In the presence of encroachment, the manufacturer could assemble products using (high-end) components purchased from the supplier, and assemble products using (low-end) components produced in-house. Thus, the manufacturer must deliberate on how to manage the expanded organisation consisting of competing product divisions. In this paper, we examine the quintessential organisational structure decision – the centralisation versus decentralisation choice – from the perspective of the manufacturer. Our model assumes that the supplier is a dominant player, moving first by pricing the high-end component, and consumers have a higher willingness-to-pay of the product containing the high-end component. In such a context, we find that the manufacturer may encroach on the supplier even if producing the low-end component costs more than producing the high-end one. The supplier should strategically price to deter or accommodate downstream encroachment contingent on the manufacturer’s organisational structure decision. If the unit cost of low-end components is high enough, product-based decentralisation is preferred to centralisation due to the supplier’s lower wholesale price. Furthermore, the manufacturer’s strategic decentralisation always hurts the supplier, always benefits the customers and could benefit or hurt the entire supply chain under certain conditions.     

Advance booking discount in the presence of spot market

We consider a risk-neutral firm that can procure raw material via long-term contract as well as in spot market, using the material as a one-to-one input to produce a seasonal product and selling it in the customer market. The firm can use the advance booking discount (ABD) program to entice customers to place their orders prior to the selling season. The ABD program provides an opportunity for the firm to update its understanding of the regular demand and spot price. We separately analyse two cases: (NI) no information updating and (IU) information updating cases. In each case, we derive the optimal discount pricing strategy and corresponding expected profit of the firm. By comparing them, we investigate the value of information updating obtained from the pre-committed order. Among others, our study finds that if the product has a relatively high profit margin, or a low profit margin where the raw material spot price is more sensitive to the trading volume, it is optimal for the firm to implement the discount strategy. The optimal discount coefficient in the IU case is never lower than in the NI case. We further find that the optimal discount coefficient in the NI case decreases in spot market volatility; however, it increases in spot market volatility if and only if the firm’s market share is larger than half of the total market demand in the IU case.     

竞争环境下专家服务型工作的定价和质量控制

以专家服务型工作为主要研究对象,考虑在市场竞争的环境下,企业面对针对价格和质量水平具有不同敏感程度的策略顾客,以及相应的反应函数,为了使企业期望利润最大化提出不同的最优定价和质量控制策略.结合数据演示我们看到公司会对价格敏感的顾客采用低价策略,而对质量要求高的顾客提高质量水平；同时解释了为何公司应该尽量发展优质的客户群...     

Joint pricing and advertising strategy with reference price effect

Consumers are susceptible to reference price effects when they make purchase decisions for a certain product. Meanwhile, the sales price and advertisement are the determinable factors that have impact on consumers’ reference price which are also fundamental marketing strategies. Therefore, how to determine an appropriate sales price and advertising effort level to maximise firms’ profits is an essential task. A joint pricing and advertising problem for a monopolistic firm with consideration of reference price effect is investigated, where consumer demand rate is price-sensitivity and depends on the gap between the sales price and the reference price in consumers’ mind. An optimisation model is established to maximise the firm’s total profit by making a joint pricing and advertising strategy. The static and dynamic joint strategies are obtained by applying Pontryagin’s maximum principle. Results show that the dynamic strategies dominate the static ones. Furthermore, the dynamic pricing and dynamic advertising strategies are strategic complements. Additionally, the length of the sales period plays a key role in determining the superiority of the two dynamic strategies. Specifically, a relatively short sales period highlights the value of the dynamic advertising while a long sales period strengthens the function of the dynamic pricing.     

Optimal pricing strategy for the perishable food supply chain

This research investigates the optimal pricing strategy for the perishable food supply chain. Using the setting of a two-echelon supply chain including a supplier and a retailer, we apply the game theory approach to derive the equilibriums for both a single pricing strategy and a two-stage pricing strategy. Through a comparison of the equilibriums, we explore how the two pricing strategies affect the supply chain’s decisions and supplier’s and retailer’s performance individually and collectively. The results of the analysis show that the optimal choice of pricing strategy depends on the price markdown cost and its relationship with the two critical thresholds that are determined by a combination of factors including the potential market size, the price and quality sensitivity factors, the initial quality, the unit product cost, and the quality deterioration rate.     

State Dependent Pricing with a Queue

Existing studies of pricing when customers queue, assume that the firm cannot adjust the price to the state of demand. In most applications this assumption is false. We adapt the classic model of Naor (1969) to allow the firm to adjust the price to the state of demand. When customers are homogeneous the firm's pricing rule maximizes social welfare. When customers are unobservably heterogenous, the firm's pricing rule does not maximize social welfare. We find that the firm may not always attract customers even when it is technically and economically feasible to do so. This is interpreted as an option effect. The effects of changes to the basic parameters, on the queue length are presented.     

Agent-based simulation of pricing strategy for agri-products considering customer preference

Agri-products typically have short life cycles and are perishable. The price of perishable goods is influenced by many factors. Customers in a market have different preferences with regard to price, the quality of the product and the brand. Though studies on pricing strategies that consider customer preference are rare, this paper addresses the problem of optimal pricing strategy for retailers considering customer preferences. Traditional mathematical methods cannot adequately describe the complexities of customer preference. Due to these complexities, this paper proposes an agent-based simulation model composed of six retailers and hundreds of customers, each with personal preferences. The different retailers set prices according to freshness, inventory, cost and other factors. Due to the perishable nature of the products considered, this paper proposes a new categorising price strategy that sets prices according to different degrees of treatments. By comparing the final profit of all retailers at the end of a simulation, the categorising price strategy is demonstrated to be the optimal strategy if customers with different preferences are randomly distributed. Furthermore, based on the model, the paper studies how optimal strategies are influenced by the proportion of customers with different preferences.     

基于消费者接受程度的双渠道产品价格和质量决策研究

在消费者对直销渠道和零售渠道接受程度有差异的情形下,研究了产品质量为内生的双渠道供应链中价格和质量联合决策问题。分别构建传统单一零售渠道模型、双渠道分散决策模型和双渠道集中决策模型。比较制造商和零售商在3种模型下的定价均衡决策、产品质量水平和利润,分析零售商和制造商的渠道策略和最优定价。结果表明：与传统单一零售渠道情形相比,在集中决策情形下,制造商开通直销渠道不改变零售价格,但是能够提高产品质量水平和供应链整体利润;在分散决策情形下,制造商开通直销渠道将降低产品批发价、零售价以及产品质量水平;另外当消费者对直销渠道接受程度适中时,制造商和零售商可实现帕累托改进。     

Impact of demand price elasticity on advantages of cooperative advertising in a two-tier supply chain

This paper focuses on pricing and vertical cooperative advertising decisions in a two-tier supply chain. Using a Stackelberg game model where the manufacturer acts as the game leader and the retailer acts as the game follower, we obtain closed-form equilibrium solution and explicitly show how pricing and advertising decisions are made. When market demand decreases exponentially with respect to the retail price and increases with respect to national and local advertising expenditures in an additive way, the manufacturer benefits from providing percentage reimbursement for the retailer’s local advertising expenditure when demand price elasticity is large enough. Whether the manufacturer benefits from cooperative advertising is also closely related to supply chain member’s relative advertising efficiency. In the decision for adopting coop advertising strategy, it is critical for the manufacturer to identify how market demand depends on national and local advertisements. The findings from this research can enhance our understanding of cooperative advertising decisions in a two-tier supply chain with price-dependent demand.