Title: Joint pricing and replenishment policies for group-buying auction
Author: Allen H. Tai
Address: Department of Applied Mathematics, The Hong Kong Polytechnic University, Hung Hom, Hong Kong
Abstract: Group-buying auction has become a popular marketing strategy in the last decade. In this paper, a stochastic model is developed for an inventory system subjects to price-sensitive demand from group-buying auctions. The model discussed here takes into account the costs of inventory, transportation, dispatching and re-order as well as the penalty cost of non-successful auctions. Since a new cycle begins whenever there is a replenishment of products, the long-run average profit can be obtained by using the renewal theory. Closed form solution of the optimal replenishment quantity is derived and an optimal unit selling price is then obtained.
Keywords: group buying auctions; marketing strategy; inventory modelling; replenishment policy; optimal pricing; inventory costs; transport costs; dispatching costs; re-order costs; unsuccessful auctions; renewal theory.
Int. J. of Intelligent Engineering Informatics, 2014 Vol.2, No.4, pp.271 - 283
Date of acceptance: 29 Jun 2014
Available online: 23 Jan 2015