Optimal unit price and credit period for price sensitive demand and random supply
by Nita H. Shah, Ajay S. Gor, Hui-Ming Wee
International Journal of Applied Decision Sciences (IJADS), Vol. 1, No. 4, 2008

Abstract: In this study, the authors develop a supplier-retailer optimal integrated strategy where the retailer's demand is price sensitive and the supplier's supply is random. It is assumed that the supplier's supply follows a normal distribution and the supplier may offer credit period to the retailer. The expected profit is maximised with respect to the unit price charged and the credit period offered by the supplier. The computational steps are provided to obtain the supplier's and the retailer's decision variables under individual (non-cooperative) as well as joint (cooperative) strategies. The sensitivity analysis of the parameters is carried out using a numerical example. The authors observe that it is beneficial to consider negotiating the optimal pricing and trade credit policies.

Online publication date: Thu, 05-Feb-2009

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