Search

This paper considers a supply chain that consists of a manufacturer and a retailer, who concern their respective profits as well as consumer welfare. Each firm's objective is modelled as a weighted sum of its profit and consumer surplus, with the weight on consumer surplus representing the concern level of the firm. We first examine a push supply chain where the manufacturer determines the wholesale price and the retailer determines the order quantity. We derive the optimal decisions and investigate the impact of the firms' consumer surplus consideration on the interactive decisions of the supply chain members and the overall performance of the supply chain. We show that a higher level of retailer's consumer concern does not necessarily lead to higher consumer surplus because her concern on consumers may be exploited by the manufacturer to improve his objective; and the manufacturer's concern on consumers may not benefit the retailer in terms of her profit, especially when the manufacturer's concern level is relatively low. Nevertheless, compared to the for‐profit supply chain, concern on consumer surplus could be beneficial to both firms' profits as well as consumer surplus, inducing a "win‐win‐win" situation under certain conditions. Furthermore, as a social planner, the government seeks to optimize social welfare by adopting subsidy policies, and we examine two types of intervention policies, that is, subsidizing firms and subsidizing consumers. We show that when subsidizing firms, government's quantity‐based subsidy is always more cost‐effective than sales‐based subsidy. As the firms' concern levels become higher or the demand uncertainty becomes lower, subsidizing consumers can achieve higher social welfare than subsidizing firms. Moreover, we examine the impact of the government's budget constraint and concern level on consumer surplus, and extend the analysis to a pull supply chain to show the robustness of the major findings. [ABSTRACT FROM AUTHOR]

With rapid development of live-streaming e-commerce, an increasing number of firms are collaborating with live-streamers (e.g., online influencers and celebrities) to host online live-shows for selling their products. To reduce the firm's risk and motivate it to stock more, live-streamers can commit a minimum sales volume and/or the effort devoted to attracting fans and promoting the upcoming live-show. In this article, we study the roles of such sales and effort commitments on the performance of a "supply chain" in which a seller sells its product via a live-streamer. Product demand at the live-show is random while depending on the live-streamer's pre-show effort and the seller needs to decide the amount of inventory for sale at the live-show. We consider three scenarios, in which the live-streamer makes sales-only, effort-only, and hybrid commitments, and compare the decisions and profits of both parties. We show that the commitment on sales volume or effort is mutually beneficial to the seller and the live-streamer. Moreover, the hybrid commitment can motivate the seller to stock more inventory and induce more effort from the live-streamer compared to sales-only or effort-only commitment. The live-streamer always prefers the hybrid commitment whereas the seller may prefer the sales-only commitment, for example, when the penalty is at a medium level. [ABSTRACT FROM AUTHOR]

Many high-value experience goods, such as pianos and Chinese zithers, are usually characterized by uncertain future values. As such, a portion of customers (called 'consumers') may hesitate to buy the product because they are unsure of the product's actual value and/or they may expect to buy the product at a lower price in the future. Moreover, the fluctuating future value creates arbitrage opportunities for another group of customers (called 'speculators') who may benefit from stocking up a product and reselling it at a higher price at a future time. Considering a firm that sells a limited number of high-value experience goods over two periods, this paper investigates the profitability of a rent-to-own (R2O) contract, under which a consumer can return the product in the future period (e.g. when it turns out to be inappropriate) or buy the product at the realised future price. We study the optimal pricing decisions involved in the R2O contract for two scenarios. In the base model, the uncertain future price is exogenously given, and in the extended model, the future price is endogenously determined by the firm and speculators. Numerical experiments are conducted to evaluate the value of R2O contracts. [ABSTRACT FROM AUTHOR]

It has been challenging for firms to effectively manage demand when they release products of one generation after another one. Motivated by the observations from the smartphone industry, this paper investigates the effectiveness of two demand management strategies in the presence of a product rollover: the upgrade program and price markdown policy. Under an upgrade program, a firm allows customers to upgrade their on‐hand product to a new generation product that will be released in a future time. Under a markdown pricing policy, the firm offers a discount for the currently available product so as to induce waiting customers to make immediate purchases. The two demand management strategies target different groups of customers and have distinct impacts on customers' choices. Starting from the time‐varying choice behavior of a heterogeneous group of customers, we study the optimal pricing decisions involved in the two strategies. Specifically, when customers are myopic in the sense that they only make a one‐time purchasing decision upon arrival, we show that the firm should offer the upgrade program only when the innovation level of the new product is relatively high, and the firm's optimal upgrade price can increase over time. Generally, the firm should offer the upgrade program during the early selling period and adopt markdown pricing as the release date of the new product approaches. Numerical experiments reveal that the dynamic upgrade program and markdown pricing policies can help improve profit significantly. When customers are strategic in the sense that they can monitor the selling prices and make dynamic purchasing decisions until they buy a unit of product, we examine two coping strategies that a firm can adopt, and investigate how the strategic monitoring behavior may influence a firm's optimal selling decisions and profit. [ABSTRACT FROM AUTHOR]