IDEAS home Printed from https://ideas.repec.org/a/inm/oropre/v59y2011i6p1523-1527.html
   My bibliography  Save this article

TECHNICAL NOTE---An Optimal Policy for Joint Dynamic Price and Lead-Time Quotation

Author

Listed:
  • Jiejian Feng

    (School of Business, Saint Mary's University, Halifax, Nova Scotia B3H 3C3, Canada)

  • Liming Liu

    (Faculty of Business, Lingnan University, Kowloon, Hong Kong, China)

  • Xiaoming Liu

    (Faculty of Business Administration, University of Macao, Macao, China)

Abstract

For a dynamic joint price and lead-time quotation problem with a fairly general demand function, we show that the policy consisting of a threshold and a reward-maximizing lead-time is optimal. This policy offers some interesting managerial insights. Under this policy, finding the exact optimal quotation can be accomplished by single-variable policy iterations of unimodal value functions.

Suggested Citation

  • Jiejian Feng & Liming Liu & Xiaoming Liu, 2011. "TECHNICAL NOTE---An Optimal Policy for Joint Dynamic Price and Lead-Time Quotation," Operations Research, INFORMS, vol. 59(6), pages 1523-1527, December.
    • Handle: RePEc:inm:oropre:v:59:y:2011:i:6:p:1523-1527
    DOI: 10.1287/opre.1110.0969
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/opre.1110.0969
    Download Restriction: no
    File URL: https://libkey.io/10.1287/opre.1110.0969?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Izak Duenyas & Wallace J. Hopp, 1995. "Quoting Customer Lead Times," Management Science, INFORMS, vol. 41(1), pages 43-57, January.
    2. Liming Liu & Mahmut Parlar & Stuart X. Zhu, 2007. "Pricing and Lead Time Decisions in Decentralized Supply Chains," Management Science, INFORMS, vol. 53(5), pages 713-725, May.
    3. Tamer Boyaci & Saibal Ray, 2003. "Product Differentiation and Capacity Cost Interaction in Time and Price Sensitive Markets," Manufacturing & Service Operations Management, INFORMS, vol. 5(1), pages 18-36, May.
    4. Lode Li, 1992. "The Role of Inventory in Delivery-Time Competition," Management Science, INFORMS, vol. 38(2), pages 182-197, February.
    5. So, Kut C. & Song, Jing-Sheng, 1998. "Price, delivery time guarantees and capacity selection," European Journal of Operational Research, Elsevier, vol. 111(1), pages 28-49, November.
    6. Izak Duenyas, 1995. "Single Facility Due Date Setting with Multiple Customer Classes," Management Science, INFORMS, vol. 41(4), pages 608-619, April.
    7. Slotnick, Susan A. & Sobel, Matthew J., 2005. "Manufacturing lead-time rules: Customer retention versus tardiness costs," European Journal of Operational Research, Elsevier, vol. 163(3), pages 825-856, June.
    8. Erica L. Plambeck, 2004. "Optimal Leadtime Differentiation via Diffusion Approximations," Operations Research, INFORMS, vol. 52(2), pages 213-228, April.
    9. Candace Arai Yano, 1987. "Setting Planned Leadtimes in Serial Production Systems with Tardiness Costs," Management Science, INFORMS, vol. 33(1), pages 95-106, January.
    10. Barış Ata & Tava Lennon Olsen, 2009. "Near-Optimal Dynamic Lead-Time Quotation and Scheduling Under Convex-Concave Customer Delay Costs," Operations Research, INFORMS, vol. 57(3), pages 753-768, June.
    11. Kenneth R. Baker, 1984. "Sequencing Rules and Due-Date Assignments in a Job Shop," Management Science, INFORMS, vol. 30(9), pages 1093-1104, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hammami, Ramzi & Frein, Yannick & Nouira, Imen & Albana, Abduh-Sayid, 2022. "On the interplay between local lead times, overall lead time, prices, and profits in decentralized supply chains," International Journal of Production Economics, Elsevier, vol. 243(C).
    2. A. Baykal Hafızoğlu & Esma S. Gel & Pınar Keskinocak, 2016. "Price and Lead Time Quotation for Contract and Spot Customers," Operations Research, INFORMS, vol. 64(2), pages 406-415, April.
    3. A. Baykal Hafızoğlu & Esma S. Gel & Pınar Keskinocak, 2013. "Expected Tardiness Computations in Multiclass Priority M / M / c Queues," INFORMS Journal on Computing, INFORMS, vol. 25(2), pages 364-376, May.
    4. Zhang, Jian & Nault, Barrie R. & Tu, Yiliu, 2015. "A dynamic pricing strategy for a 3PL provider with heterogeneous customers," International Journal of Production Economics, Elsevier, vol. 169(C), pages 31-43.
    5. Lu, Yuwei & Xie, Xiaolan & Jiang, Zhibin, 2018. "Dynamic appointment scheduling with wait-dependent abandonment," European Journal of Operational Research, Elsevier, vol. 265(3), pages 975-984.
    6. Myron Benioudakis & Apostolos Burnetas & George Ioannou, 2022. "Single versus dynamic lead-time quotations in make-to-order systems with delay-averse customers," Annals of Operations Research, Springer, vol. 318(1), pages 33-65, November.
    7. Vasiliki Kostami, 2020. "Price and Lead time Disclosure Strategies in Inventory Systems," Production and Operations Management, Production and Operations Management Society, vol. 29(12), pages 2760-2788, December.
    8. Philipp Afèche & Opher Baron & Yoav Kerner, 2013. "Pricing Time-Sensitive Services Based on Realized Performance," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 492-506, July.
    9. Benioudakis, Myron & Burnetas, Apostolos & Ioannou, George, 2021. "Lead-time quotations in unobservable make-to-order systems with strategic customers: Risk aversion, load control and profit maximization," European Journal of Operational Research, Elsevier, vol. 289(1), pages 165-176.
    10. Liu, Jian & Chen, Jian & Bo, Rui & Meng, Fanlin & Xu, Yong & Li, Peng, 2023. "Increases or discounts: Price strategies based on customers’ patience times," European Journal of Operational Research, Elsevier, vol. 305(2), pages 722-737.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weixin Shang & Liming Liu, 2011. "Promised Delivery Time and Capacity Games in Time-Based Competition," Management Science, INFORMS, vol. 57(3), pages 599-610, March.
    2. Philipp Afèche & Opher Baron & Yoav Kerner, 2013. "Pricing Time-Sensitive Services Based on Realized Performance," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 492-506, July.
    3. Slotnick, Susan A. & Sobel, Matthew J., 2005. "Manufacturing lead-time rules: Customer retention versus tardiness costs," European Journal of Operational Research, Elsevier, vol. 163(3), pages 825-856, June.
    4. Gökçe Kahveciog̃lu & Barış Balcıog̃lu, 2016. "Coping with production time variability via dynamic lead-time quotation," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(4), pages 877-898, October.
    5. Zhu, Stuart X., 2015. "Integration of capacity, pricing, and lead-time decisions in a decentralized supply chain," International Journal of Production Economics, Elsevier, vol. 164(C), pages 14-23.
    6. Seçil Savaşaneril & Paul M. Griffin & Pınar Keskinocak, 2010. "Dynamic Lead-Time Quotation for an M/M/1 Base-Stock Inventory Queue," Operations Research, INFORMS, vol. 58(2), pages 383-395, April.
    7. A. Baykal Hafızoğlu & Esma S. Gel & Pınar Keskinocak, 2016. "Price and Lead Time Quotation for Contract and Spot Customers," Operations Research, INFORMS, vol. 64(2), pages 406-415, April.
    8. Liming Liu & Mahmut Parlar & Stuart X. Zhu, 2007. "Pricing and Lead Time Decisions in Decentralized Supply Chains," Management Science, INFORMS, vol. 53(5), pages 713-725, May.
    9. Zhang, Jian & Nault, Barrie R. & Tu, Yiliu, 2015. "A dynamic pricing strategy for a 3PL provider with heterogeneous customers," International Journal of Production Economics, Elsevier, vol. 169(C), pages 31-43.
    10. Sabri Çelik & Costis Maglaras, 2008. "Dynamic Pricing and Lead-Time Quotation for a Multiclass Make-to-Order Queue," Management Science, INFORMS, vol. 54(6), pages 1132-1146, June.
    11. Roman Kapuscinski & Sridhar Tayur, 2007. "Reliable Due-Date Setting in a Capacitated MTO System with Two Customer Classes," Operations Research, INFORMS, vol. 55(1), pages 56-74, February.
    12. Erica L. Plambeck, 2004. "Optimal Leadtime Differentiation via Diffusion Approximations," Operations Research, INFORMS, vol. 52(2), pages 213-228, April.
    13. Sun, Yiqi & Wu, Zhengping & Zhu, Wanshan, 2022. "When do firms benefit from joint price and lead-time competition?," European Journal of Operational Research, Elsevier, vol. 302(2), pages 497-517.
    14. Vasiliki Kostami, 2020. "Price and Lead time Disclosure Strategies in Inventory Systems," Production and Operations Management, Production and Operations Management Society, vol. 29(12), pages 2760-2788, December.
    15. Jin, Xianfei & Li, Kunpeng & Sivakumar, Appa Iyer, 2013. "Scheduling and optimal delivery time quotation for customers with time sensitive demand," International Journal of Production Economics, Elsevier, vol. 145(1), pages 349-358.
    16. Modarres, Mohammad & Sharifyazdi, Mehdi, 2009. "Revenue management approach to stochastic capacity allocation problem," European Journal of Operational Research, Elsevier, vol. 192(2), pages 442-459, January.
    17. Slotnick, Susan A., 2011. "Optimal and heuristic lead-time quotation for an integrated steel mill with a minimum batch size," European Journal of Operational Research, Elsevier, vol. 210(3), pages 527-536, May.
    18. Secil Savasaneril & Ece Sayin, 2017. "Dynamic lead time quotation under responsive inventory and multiple customer classes," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(1), pages 95-135, January.
    19. Slotnick, Susan A., 2011. "Order acceptance and scheduling: A taxonomy and review," European Journal of Operational Research, Elsevier, vol. 212(1), pages 1-11, July.
    20. Hammami, Ramzi & Frein, Yannick & Nouira, Imen & Albana, Abduh-Sayid, 2022. "On the interplay between local lead times, overall lead time, prices, and profits in decentralized supply chains," International Journal of Production Economics, Elsevier, vol. 243(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:oropre:v:59:y:2011:i:6:p:1523-1527. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.