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Article: Stackelberg game-theoretic model for optimizing advertising, pricing and inventory policies in vendor managed inventory (VMI) production supply chains

TitleStackelberg game-theoretic model for optimizing advertising, pricing and inventory policies in vendor managed inventory (VMI) production supply chains
Authors
KeywordsStackelberg game theory
Supply chain management
Vendor managed inventory
Issue Date2009
PublisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/cie
Citation
Computers And Industrial Engineering, 2009, v. 57 n. 1, p. 368-382 How to Cite?
AbstractThis paper discusses how a manufacturer and its retailers interact with each other in order to optimize their individual net profits by adjusting product marketing (advertising and pricing) and inventory policies in an information-asymmetric VMI (vendor managed inventory) supply chain. The manufacturer produces and supplies a single product at the same wholesale price to multiple retailers who then sell the product in dispersed and independent markets at retail prices. The demand rate in each market is an increasing and concave function of the advertising investments of both local retailers and the manufacturer, but a decreasing and convex function of the retail prices. The manufacturer determines its wholesale price, its advertising investment, replenishment cycles for the raw materials and finished product, and backorder quantity to maximize its profit. Retailers in turn consider the replenishment policies and the manufacturer's promotion policies and determine the optimal retail prices and advertisement investments to maximize their profits. This problem is modeled as a Stackelberg game where the manufacturer is the leader and retailers are followers. An algorithm has been proposed to search the Stackelberg equilibrium. A numerical study has been conducted to demonstrate how the algorithm works and to understand the influences of decision variables and/or parameters. Several research questions are examined, including under what circumstances the retailers and manufacturer should increase their advertising expenditures and/or reduce the retail prices and what actions should be taken if the prices of raw materials or their holding costs increase. © 2008 Elsevier Ltd. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/129245
ISSN
2015 Impact Factor: 2.086
2015 SCImago Journal Rankings: 1.630
ISI Accession Number ID
Funding AgencyGrant Number
National Natural Science Foundation of China70501027
70629002
70525001
CRCG and Outstanding Young Researcher Award of the University of Hong Kong
NWO VENI451-07-017
Funding Information:

We are grateful to the reviewers for their valuable comments, and much benefited. The research is supported by the National Natural Science Foundation of China (#70501027, #70629002, and #70525001), CRCG and Outstanding Young Researcher Award of the University of Hong Kong, and the NWO VENI Grant (No: 451-07-017) of the Netherlands.

References

 

DC FieldValueLanguage
dc.contributor.authorYu, Yen_HK
dc.contributor.authorHuang, GQen_HK
dc.contributor.authorLiang, Len_HK
dc.date.accessioned2010-12-23T08:34:00Z-
dc.date.available2010-12-23T08:34:00Z-
dc.date.issued2009en_HK
dc.identifier.citationComputers And Industrial Engineering, 2009, v. 57 n. 1, p. 368-382en_HK
dc.identifier.issn0360-8352en_HK
dc.identifier.urihttp://hdl.handle.net/10722/129245-
dc.description.abstractThis paper discusses how a manufacturer and its retailers interact with each other in order to optimize their individual net profits by adjusting product marketing (advertising and pricing) and inventory policies in an information-asymmetric VMI (vendor managed inventory) supply chain. The manufacturer produces and supplies a single product at the same wholesale price to multiple retailers who then sell the product in dispersed and independent markets at retail prices. The demand rate in each market is an increasing and concave function of the advertising investments of both local retailers and the manufacturer, but a decreasing and convex function of the retail prices. The manufacturer determines its wholesale price, its advertising investment, replenishment cycles for the raw materials and finished product, and backorder quantity to maximize its profit. Retailers in turn consider the replenishment policies and the manufacturer's promotion policies and determine the optimal retail prices and advertisement investments to maximize their profits. This problem is modeled as a Stackelberg game where the manufacturer is the leader and retailers are followers. An algorithm has been proposed to search the Stackelberg equilibrium. A numerical study has been conducted to demonstrate how the algorithm works and to understand the influences of decision variables and/or parameters. Several research questions are examined, including under what circumstances the retailers and manufacturer should increase their advertising expenditures and/or reduce the retail prices and what actions should be taken if the prices of raw materials or their holding costs increase. © 2008 Elsevier Ltd. All rights reserved.en_HK
dc.languageengen_US
dc.publisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/cieen_HK
dc.relation.ispartofComputers and Industrial Engineeringen_HK
dc.subjectStackelberg game theoryen_HK
dc.subjectSupply chain managementen_HK
dc.subjectVendor managed inventoryen_HK
dc.titleStackelberg game-theoretic model for optimizing advertising, pricing and inventory policies in vendor managed inventory (VMI) production supply chainsen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0360-8352&volume=57&issue=1&spage=368&epage=382&date=2009&atitle=Stackelberg+game-theoretic+model+for+optimizing+advertising,+pricing+and+inventory+policies+in+vendor+managed+inventory+(VMI)+production+supply+chains-
dc.identifier.emailHuang, GQ:gqhuang@hkucc.hku.hken_HK
dc.identifier.authorityHuang, GQ=rp00118en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.cie.2008.12.003en_HK
dc.identifier.scopuseid_2-s2.0-67349125455en_HK
dc.identifier.hkuros178667en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-67349125455&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume57en_HK
dc.identifier.issue1en_HK
dc.identifier.spage368en_HK
dc.identifier.epage382en_HK
dc.identifier.isiWOS:000267518000040-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridYu, Y=14822788000en_HK
dc.identifier.scopusauthoridHuang, GQ=7403425048en_HK
dc.identifier.scopusauthoridLiang, L=25632675700en_HK
dc.identifier.citeulike5495087-

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