Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/25282
Title: Optimal pricing, modularity, and return policy under mass customization
Authors: Liu, N
Choi, TM 
Yuen, CWM
Ng, F 
Keywords: Mean-variance model
operations management
optimal modular design
optimal pricing
optimal return
uncertainty
Issue Date: 2012
Publisher: Institute of Electrical and Electronics Engineers
Source: IEEE transactions on systems, man, and cybernetics. Part A, Systems and humans, 2012, v. 42, no. 3, 6065765, p. 604-614 How to cite?
Journal: IEEE transactions on systems, man, and cybernetics. Part A, Systems and humans 
Abstract: Mass customization (MC) is a pertinent industrial practice. Different from the non-MC products, consumer return for MC products is typically prohibited. MC retailers can thus gain significant competitive advantages by offering a consumer return policy. By constructing an analytical model with both demand and return uncertainties, we study in this paper the optimal policy with three dimensional decisions on pricing, consumer return, and level of modularity under a mean-variance formulation. Structural properties of the model are revealed, and the closed-form solutions for the optimal decisions are derived. An extensive sensitivity analysis is subsequently conducted to explore how the risk sensitivity, demand uncertainty, return uncertainty, and other important parameters affect the optimal decisions and profits. A few counterintuitive findings are obtained, and important insights are generated.
URI: http://hdl.handle.net/10397/25282
ISSN: 1083-4427
EISSN: 1083-4419
DOI: 10.1109/TSMCA.2011.2170063
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