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Coordination in vendor-buyer inventory systems: on price discounts, Stackelberg game and joint optimisation

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  • S. Viswanathan

Abstract

We consider a version of the Stackelberg game that is used to model discount pricing decisions in vendor-buyer supply chains. The game consists of a leader who is selling a product to one (or more) follower(s) who in turn sell it to the ultimate consumers. We define conditional strategy for the leader as a strategy where the transfer price offered by the leader is conditional upon the specific decision taken by the follower. We show that the leader's optimal conditional strategy can achieve perfect coordination. We then discuss the application of the result to specific models for discount pricing decisions in vendor-buyer inventory systems and interpret its implications for these models.

Suggested Citation

  • S. Viswanathan, 2009. "Coordination in vendor-buyer inventory systems: on price discounts, Stackelberg game and joint optimisation," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 6(1), pages 110-124.
    • Handle: RePEc:ids:ijores:v:6:y:2009:i:1:p:110-124
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    Cited by:

    1. Yu, Yugang & Hong, Zhaofu & Zhang, Linda L. & Liang, Liang & Chu, Chengbin, 2013. "Optimal selection of retailers for a manufacturing vendor in a vendor managed inventory system," European Journal of Operational Research, Elsevier, vol. 225(2), pages 273-284.

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