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Optimal Ordering Policy for Retailers with Bayesian Information Updating in a Presale System

Author

Listed:
  • Jinxian Quan

    (Parcel Service Operation & Planning Department, CJ Logistics, 53, Sejong-daero 9-gil, Jung-gu, Seoul 04513, Korea)

  • Sung-Won Cho

    (Maritime Safety and Environmental Research Division, Korea Research Institute of Ships and Ocean Engineering, 32, Yuseong-daero 1312 beon-gil, Yuseong-gu, Daejeon 34103, Korea)

Abstract

In this study, we investigate inventory allocation and pricing strategies for retailers by incorporating demand information into the issue of inventory allocation during the presale period. In a presale system, retailers offer presale goods at a price lower than the retail price. By offering products at a discount, retailers may attract additional demand. In addition, this system enables retailers to reduce the uncertainty of market demand and establish a strategy for inventory allocation based on the results of presales. A Bayesian approach was employed to analyze and update demand information, and inventory allocation was formulated as a newsvendor problem to determine the optimal policy that maximizes retailer profit. A numerical analysis was conducted to validate the effectiveness of the proposed strategy. Results suggest that the proposed strategies can support retailers by more accurately predicting demand and achieving higher profits with less inventory. Furthermore, retailers can experience greater benefits from risk-averse customers than from risk-neutral customers.

Suggested Citation

  • Jinxian Quan & Sung-Won Cho, 2021. "Optimal Ordering Policy for Retailers with Bayesian Information Updating in a Presale System," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:22:p:12525-:d:677928
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    References listed on IDEAS

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