TITLE:
A Quantity Discount Pricing Model Based on the Standard Container under Asymmetric Information
AUTHORS:
Zhengping DING, Keyi WANG
KEYWORDS:
inventory coordination, asymmetric information, quantity discounts, standard container
JOURNAL NAME:
Journal of Service Science and Management,
Vol.2 No.3,
September
11,
2009
ABSTRACT: A supply chain system is studied, in which the information about the retailer’s storage cost is usually asymmetric. This paper studies the inventory control in the system and presents a quantity discount pricing model for inventory coordination based on the standard container, a transport tool from the supplier to the retailer with a fixed size. First, it investigates the inventory models under full information. Before inventory coordination, the supplier and the retailer my-opically choose their lot sizes, which is not the optimal decision for the whole system. Then, it presents an incentive scheme under asymmetric information from the point of view of the supplier. It also discusses the solution and the distribution of the incremental profits after the incentive scheme is adopted by both the supplier and the retailer. A con-stant in the model, which affects the distribution of the incremental profits, is optimized for the supplier by using numerical analysis. Finally, an example illustrates the application of the model. After inventory coordination, both the supplier and the retailer have a positive incremental profit.