A Quantity Discount Pricing Model for Deteriorating Items to Increase Supplier's Profit under Price-sensitive Demand

摘要

Quantity discounts used as a coordination mechanism to achieve the profitability and cost effective of supply chain have been studied over years, but with little attention to deteriorating items. In this paper, we address the problem of how a supplier develop a discount pricing structure for deteriorating items with price-sensitive demand when the supplier and the buyer make their decisions independently. The problem is analyzed as a Stackelberg game in which the supplier acts as the leader by announcing its pricing policy to the buyer in advance and the buyer acts as the follower by determining his unit selling price and thus annual sales volume is determined. Sensitivity analysis with numerical example shows that quantity discounts increase as the price-sensitive parameter and deterioration rate increase. It is also shown that when demand is price-sensitive, it is required the buyer decrease his replenishment interval when quantity discounts is given.