Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/14318
Title: Optimal promotion planning-depth and frequency-for a two-stage supply chain under Markov switching demand
Authors: Kurata, H
Liu, JJ
Keywords: Inventory decision
Marketing-operations interface
Markov-switching model
Promotion
Supply chain management
Issue Date: 2006
Publisher: Elsevier
Source: European journal of operational research, 2006, v. 177, no. 2, p. 1026-1043 How to cite?
Journal: European journal of operational research 
Abstract: In considering the retailer-supplier supply chain, this paper analyzes how a retailer reasonably decides both the depth and frequency of the price discount promotion including or excluding a supplier's inventory decision. Assuming that the promotion frequency used by the retailer is probabilistic, we model a promotion-inventory decision under an AR(1) demand with a Markov switching promotion regime. After obtaining the optimal promotion plan, our analysis also considers the behavior of the optimal promotion decision; the retailer's price format selection, either an Every-Day-Low-Price policy (EDLP) or a Promotion policy (HiLo); and the impact of information sharing of promotion status on the system's performance. Our results suggest that a retailer tends to overpromote if inventory cost is excluded in its promotion decision, that increasing the market share is a preferable action for both the retailer and the supplier, that total margin and price-elasticity play an important role in selecting the price format, and that the profitability for a supplier of sharing promotion information depends on the transition probabilities of the Markov switching regime.
URI: http://hdl.handle.net/10397/14318
ISSN: 0377-2217
EISSN: 1872-6860
DOI: 10.1016/j.ejor.2006.01.009
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