The optimal delivery time and order quantity in an oligopoly market with time-sensitive customers.

Haijiao Li,Weijin Xu,Kuan Yang,Baogui Xin

doi:10.1371/journal.pone.0225436

Abstract

With the development of e-commerce, delivery time is regarded as a key competitive advantage in an oligopoly market, as shortening the delivery time can stimulate demand for products. Many firms adopt a variety of strategies to shorten delivery time, and holding sufficient inventory is reported as an effective way. This study integrates a market share attraction model based on delivery time competition with the traditional inventory model to determine the optimal delivery time and order quantity. With the use of supermodular game method, we investigate the effect of changes in marketing and operations factors on the equilibrium delivery time and order quantity in non-dominated and dominated oligopolistic markets. The results reveal that the equilibrium delivery time and order quantity exhibit a directional response to changes in marketing and operations factors, and the response differs between the non-dominated oligopoly and the dominated oligopoly. Furthermore, under a cooperative oligopolistic market with asymmetry, it is beneficial for the firms with high competitive strength to adopt the delivery time strategy, but it fails to do so for the firm with the low competitive strength. Lastly, numerical analysis suggests that marketing factors play a more important role in affecting equilibrium measures than operations factors.

Highlights

Under an increasingly fierce global competition, delivery time for ordered products to reach customers has become an increasingly important strategic instrument to gain competitive advantage [1,2,3]
Our investigation emphases on the development of time-inventory competition in an asymmetric oligopolistic market where every firm offers different delivery time and the corresponding order quantity to compete for time-sensitive customers
In view of the above observations, we focus on the following research questions: (i) What are the optimal intra-firm strategy of a given firm that adopts the decentralization and centralization of marketing and operations departments with respect to make delivery time and order quantity, respectively? (ii) How will a firm adjust its equilibrium delivery time and order quantity when marketing or operations factors change in oligopoly market? (iii) How does a dominant firm adopt the delivery time policy in a cooperative oligopoly market? (iv) What is the impact of different marketing or operations factors on equilibrium price, delivery time, and order quantity in an oligopoly market when customers are sensitive to both delivery time and price?

Summary

Introduction

Under an increasingly fierce global competition, delivery time for ordered products to reach customers has become an increasingly important strategic instrument to gain competitive advantage [1,2,3]. How to integrate inventory decisions with delivery time is an important problem in a competitive oligopolistic market In addition to such inter-firm competition, intra-firm conflict will affect operation of firms. Our investigation emphases on the development of time-inventory competition in an asymmetric oligopolistic market where every firm offers different delivery time and the corresponding order quantity to compete for time-sensitive customers. From the intra-firm competition perspective, the marketing department for a given firm determines the delivery time as well as additional decision variable price to capture the total demand by increasing the cost investment, while the operations department complies the aim of the marketing department by controlling the whole inventory cost.

Literature review

Conclusion

D2 tÀ À 1

Findings

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