Joint Ordering and Pricing Decisions for New Repeat-Purchase Products
This paper studies ordering and pricing problems for new repeat-purchase products. We incorporate the repeat-purchase rate and price effects into the Bass model to characterize the demand pattern. We consider two decision models: (1) two-stage decision model, in which the sales division chooses a pr...
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| Format: | Article |
| Language: | English |
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Wiley
2015-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2015/461959 |
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| _version_ | 1849404530543820800 |
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| author | Xiang Wu Jinlong Zhang |
| author_facet | Xiang Wu Jinlong Zhang |
| author_sort | Xiang Wu |
| collection | DOAJ |
| description | This paper studies ordering and pricing problems for new repeat-purchase products. We incorporate the repeat-purchase rate and price effects into the Bass model to characterize the demand pattern. We consider two decision models: (1) two-stage decision model, in which the sales division chooses a price to maximize the gross profit and the purchasing division determines an optimal ordering decision to minimize the total cost under a given demand subsequently, and (2) joint decision model, in which the firm makes ordering and pricing decisions simultaneously to maximize the profit. We combine the generalized Bass model with dynamic lot sizing model to formulate the joint decision model. We apply both models to a specific imported food provided by an online fresh produce retailer in Central China, solve them by Gaussian Random-Walk and Wagner-Whitin based algorithms, and observe three results. First, joint pricing and ordering decisions bring more significant profits than making pricing and ordering decisions sequentially. Second, a great initiative in adoption significantly increases price premium and profit. Finally, the optimal price shows a U-shape (i.e., decreases first and increases later) relationship and the profit increases gradually with the repeat-purchase rate when it is still not very high. |
| format | Article |
| id | doaj-art-9b2c0a2fd0b044cf8db35e6f79d7ed17 |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2015-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-9b2c0a2fd0b044cf8db35e6f79d7ed172025-08-20T03:36:58ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2015-01-01201510.1155/2015/461959461959Joint Ordering and Pricing Decisions for New Repeat-Purchase ProductsXiang Wu0Jinlong Zhang1School of Management, Huazhong University of Science & Technology, Wuhan 430074, ChinaSchool of Management, Huazhong University of Science & Technology, Wuhan 430074, ChinaThis paper studies ordering and pricing problems for new repeat-purchase products. We incorporate the repeat-purchase rate and price effects into the Bass model to characterize the demand pattern. We consider two decision models: (1) two-stage decision model, in which the sales division chooses a price to maximize the gross profit and the purchasing division determines an optimal ordering decision to minimize the total cost under a given demand subsequently, and (2) joint decision model, in which the firm makes ordering and pricing decisions simultaneously to maximize the profit. We combine the generalized Bass model with dynamic lot sizing model to formulate the joint decision model. We apply both models to a specific imported food provided by an online fresh produce retailer in Central China, solve them by Gaussian Random-Walk and Wagner-Whitin based algorithms, and observe three results. First, joint pricing and ordering decisions bring more significant profits than making pricing and ordering decisions sequentially. Second, a great initiative in adoption significantly increases price premium and profit. Finally, the optimal price shows a U-shape (i.e., decreases first and increases later) relationship and the profit increases gradually with the repeat-purchase rate when it is still not very high.http://dx.doi.org/10.1155/2015/461959 |
| spellingShingle | Xiang Wu Jinlong Zhang Joint Ordering and Pricing Decisions for New Repeat-Purchase Products Discrete Dynamics in Nature and Society |
| title | Joint Ordering and Pricing Decisions for New Repeat-Purchase Products |
| title_full | Joint Ordering and Pricing Decisions for New Repeat-Purchase Products |
| title_fullStr | Joint Ordering and Pricing Decisions for New Repeat-Purchase Products |
| title_full_unstemmed | Joint Ordering and Pricing Decisions for New Repeat-Purchase Products |
| title_short | Joint Ordering and Pricing Decisions for New Repeat-Purchase Products |
| title_sort | joint ordering and pricing decisions for new repeat purchase products |
| url | http://dx.doi.org/10.1155/2015/461959 |
| work_keys_str_mv | AT xiangwu jointorderingandpricingdecisionsfornewrepeatpurchaseproducts AT jinlongzhang jointorderingandpricingdecisionsfornewrepeatpurchaseproducts |