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Joint pricing and procurement of substitutable products with random demands - A technical note

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  • Karakul, M.
  • Chan, L.M.A.

Abstract

Single-period joint pricing and procurement of substitutable products entails one time procurement and pricing decisions for substitutable products that face price dependent stochastic demands. Recently, Karakul and Chan [Karakul, M., Chan, L., 2008. Analytical and managerial implications of integrating product substitutability in the joint pricing and procurement problem. European Journal of Operational Research 190, 179-204] considered this problem for two one-way substitutable products. Authors model the demands for each product in the well known additive form, where the mean demands are linear functions of the price of the high grade new product plus an additive stochastic noise term. By assuming that the noise term for the low grade existing product follows a general discrete distribution and the noise term for the high grade product follows a general continuous distribution, authors are able to show the unimodality of the expected profit function with respect to the procurement quantities and the price of the new product. In this paper, we extend this result to the case where the noise term in the demand of the low grade product follows a general continuous distribution as well.

Suggested Citation

  • Karakul, M. & Chan, L.M.A., 2010. "Joint pricing and procurement of substitutable products with random demands - A technical note," European Journal of Operational Research, Elsevier, vol. 201(1), pages 324-328, February.
    • Handle: RePEc:eee:ejores:v:201:y:2010:i:1:p:324-328
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    References listed on IDEAS

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    1. Karakul, M., 2008. "Joint pricing and procurement of fashion products in the existence of clearance markets," International Journal of Production Economics, Elsevier, vol. 114(2), pages 487-506, August.
    2. Karakul, M. & Chan, L.M.A., 2008. "Analytical and managerial implications of integrating product substitutability in the joint pricing and procurement problem," European Journal of Operational Research, Elsevier, vol. 190(1), pages 179-204, October.
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    2. Otero, Daniel F. & Escallón, Mariana & López, Cristina & Akhavan-Tabatabaei, Raha, 2019. "Optimal timing of airline promotions under dilution," European Journal of Operational Research, Elsevier, vol. 277(3), pages 981-995.
    3. Shin, Hojung & Park, Soohoon & Lee, Euncheol & Benton, W.C., 2015. "A classification of the literature on the planning of substitutable products," European Journal of Operational Research, Elsevier, vol. 246(3), pages 686-699.
    4. Sun, Zhongmiao & Xu, Qi & Liu, Jinrong, 2021. "Pricing and replenishment decisions for seasonal and nonseasonal products in a shared supply chain," International Journal of Production Economics, Elsevier, vol. 233(C).

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