Title: Vendor-buyer inventory model when demand is governed by innovation rate under DCF and game theoretical approach

Authors: K.K. Aggarwal; Indu Yadav; Vaishali Prasad

Addresses: Department of Operational Research, Faculty of Mathematical Sciences, University of Delhi, Delhi, 110007, India ' Department of Operational Research, Faculty of Mathematical Sciences, University of Delhi, Delhi, 110007, India ' Department of Operational Research, Faculty of Mathematical Sciences, University of Delhi, Delhi, 110007, India

Abstract: Traditional vendor-buyer inventory models have not given attention to the inventory system for new products. One of the major difficulties faced in modelling the inventory systems for new products is the existence of little or no past data about the demand pattern. Diffusion modelling procedure is a well-accepted way to model the demand pattern of new products in marketing literature. This paper formulates a mathematical model for the vendor-buyer inventory model for a new product. The demand is followed by innovation and diffusion process, the effect of only innovation rate is considered in this paper. A game theoretic technique has been used to solve the vendor-buyer model. Two scenarios have been examined, the non-cooperative and the cooperative. Both are illustrated through numerical examples, succeeded by sensitivity analysis for different parameters to show the effectiveness of the model. Discounted cash flow concept has been used for better recognition of cash flows.

Keywords: innovation diffusion; innovation effect; new products; potential market size; DCF; discounted cash flow; Stackelberg equilibrium; Pareto-optimality.

DOI: 10.1504/IJSOI.2021.117260

International Journal of Services Operations and Informatics, 2021 Vol.11 No.2/3, pp.176 - 196

Received: 21 Apr 2020
Accepted: 30 Nov 2020

Published online: 26 Aug 2021 *

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