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An integrated revenue management framework for a firm’s greening, pricing and inventory decisions

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  • Raza, Syed Asif
  • Rathinam, Sivakumar
  • Turiac, Mihaela
  • Kerbache, Laoucine

Abstract

There is a growing interest on developing efficient ways of incorporating environmental considerations into business practices in order to meet both consumers’ demand for green products/services, and the firms’ sustainable profitability. The main contribution of this article is in developing an integrated revenue management framework to address a firm’s greening (investment) effort, pricing and inventory decisions. It is assumed that the firm inaugurates a green product along with its existing product. Even though the firm offers both the green and regular product at differentiated prices, the market segmentation as a result of this price differentiation is regarded as imperfect. This imperfect market segmentation causes a demand leakage mainly due to the heterogeneity among the customers’ willingness-to-pay. These effects are included in our proposed model and simplified analytical solutions are developed to solve the same. Additional scenarios where a firm experiences a price-dependent stochastic demand with an unknown distribution is also modeled. This scenario is addressed using a distribution-free approach based on Scarf’ s rule. The performance of the proposed methods and the significance of the modeling framework are finally corroborated through several simulations. This analysis provides a sustainable environment, production and retailing framework while still augmenting profitability using fundamental tools from revenue management.

Suggested Citation

  • Raza, Syed Asif & Rathinam, Sivakumar & Turiac, Mihaela & Kerbache, Laoucine, 2018. "An integrated revenue management framework for a firm’s greening, pricing and inventory decisions," International Journal of Production Economics, Elsevier, vol. 195(C), pages 373-390.
    • Handle: RePEc:eee:proeco:v:195:y:2018:i:c:p:373-390
    DOI: 10.1016/j.ijpe.2016.11.014
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    Citations

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    Cited by:

    1. Bai, Qingguo & Gong, Yeming (Yale) & Jin, Mingzhou & Xu, Xianhao, 2019. "Effects of carbon emission reduction on supply chain coordination with vendor-managed deteriorating product inventory," International Journal of Production Economics, Elsevier, vol. 208(C), pages 83-99.
    2. Abhishek Srivastava & Abhishek Chakraborty & Arqum Mateen, 2022. "Role of power imbalance on channel coordination under greening investments," OPSEARCH, Springer;Operational Research Society of India, vol. 59(4), pages 1522-1554, December.
    3. Bing Xu & Qingyun Xu & Qiushi Bo & Qifan Hu, 2018. "Green Product Development with Consumer Heterogeneity under Horizontal Competition," Sustainability, MDPI, vol. 10(6), pages 1-20, June.
    4. Çağlar Kıvanç Kaymaz & Salih Birinci & Yusuf Kızılkan, 2022. "Sustainable development goals assessment of Erzurum province with SWOT-AHP analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(3), pages 2986-3012, March.
    5. Raza, Syed Asif, 2018. "Supply chain coordination under a revenue-sharing contract with corporate social responsibility and partial demand information," International Journal of Production Economics, Elsevier, vol. 205(C), pages 1-14.
    6. Qingfeng Meng & Hongming Zhu & Zhen Li & Jianguo Du & Xiangyu Wang & Mi Jeong Kim, 2018. "How Green Building Product Decisions from Customers Can Be Transitioned to Manufacturers: An Agent-Based Model," Sustainability, MDPI, vol. 10(11), pages 1-16, October.
    7. Chenbo Zhu & Juntian Yue & Jing Chen, 2022. "Green Product Development and Order Strategies for Retailers," Sustainability, MDPI, vol. 14(15), pages 1-18, August.
    8. Raza, Syed Asif & Govindaluri, Srikrishna Madhumohan, 2019. "Pricing strategies in a dual-channel green supply chain with cannibalization and risk aversion," Operations Research Perspectives, Elsevier, vol. 6(C).
    9. Zhen Li & Hongming Zhu & Qingfeng Meng & Changzhi Wu & Jianguo Du, 2019. "Manufacturers’ Green Decision Evolution Based on Multi-Agent Modeling," Complexity, Hindawi, vol. 2019, pages 1-14, April.
    10. Syed Asif Raza, 2020. "Price Differentiation and Inventory Decisions in a Socially Responsible Dual-Channel Supply Chain with Partial Information Stochastic Demand and Cannibalization," Sustainability, MDPI, vol. 12(22), pages 1-42, November.

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