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Postponed Holdback Pricing, Profit And Consumer Surplus

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  • YIGAL GERCHAK

    (Department of Industrial Engineering, Tel-Aviv University, Ramat Aviv, Tel Aviv 69978, Israel)

Abstract

Operational decisions of a monopolist firm affect expected social welfare, a fact typically ignored by OM models. Specifically, the price selected directly affects the consumer surplus, which has to be added to firm's profit to find the social welfare. We assume an uncertain, price-sensitive, demand. Production capacity is selected at the outset, but the price is chosen after demand uncertainty realized itself. This model was proposed by Van Mieghem and Dada (1999), but we extend it to other demand functions. We then compute the resulting consumer surplus. Finally, we consider such issues in a decentralized supply chain with revenue sharing.

Suggested Citation

  • Yigal Gerchak, 2012. "Postponed Holdback Pricing, Profit And Consumer Surplus," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(01), pages 1-8.
    • Handle: RePEc:wsi:apjorx:v:29:y:2012:i:01:n:s0217595912400076
    DOI: 10.1142/S0217595912400076
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    References listed on IDEAS

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    1. Mirrlees, James A., 2006. "Welfare, Incentives, and Taxation," OUP Catalogue, Oxford University Press, number 9780199261819.
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    Cited by:

    1. Chernonog, Tatyana & Avinadav, Tal, 2014. "Profit criteria involving risk in price setting of virtual products," European Journal of Operational Research, Elsevier, vol. 236(1), pages 351-360.
    2. Avi Herbon & Matan Shnaiderman & Tatyana Chernonog, 2018. "Postponed two-pricing and ordering opportunity for selling a single season inventoried product," Annals of Operations Research, Springer, vol. 271(2), pages 619-640, December.

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