Title: Joint pricing and replenishment policies for group-buying auction

Authors: Allen H. Tai

Addresses: 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.

DOI: 10.1504/IJIEI.2014.067175

International Journal of Intelligent Engineering Informatics, 2014 Vol.2 No.4, pp.271 - 283

Received: 25 Sep 2013
Accepted: 29 Jun 2014
Published online: 07 Feb 2015 *

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