Profit Of Retailer Research Articles

Regulating Probabilistic Selling of Counterfeits

Counterfeits are available across many marketplaces. In emerging markets, in particular, consumers often observe a mix of counterfeits and authentic products sold by retailers. It is difficult for some consumers to distinguish between the two types of products. From these consumers’ perspective, the products can be considered as probabilistic goods, and we term retailers’ strategies probabilistic selling of counterfeits. Retailers who sell counterfeits are subject to a penalty by regulation. We develop a game-theoretical model to study this dishonest strategy under regulation. Our model offers the following insights. First, a higher penalty for selling counterfeits can lead to a smaller proportion of authentic products in the market. This finding is driven by a manufacturer’s strategic response: knowing that the penalty becomes higher, the manufacturer has greater incentives to raise the wholesale price of its authentic products. From the retailers’ point of view, this elevated procurement cost can, in turn, encourage them to lower the probability of their products being authentic. Second, manufacturer profit increases with the penalty, whereas retailer profit, consumer surplus, and social welfare do not, in general, exhibit a monotonic relationship with the penalty. This paper was accepted by Dmitri Kuksov, marketing. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4607 .

Residential electricity package model considering load difference penalty in China

The increasing load difference between peak and off-peak seasons has led to the unstable operation of China’s power systems in recent years. In addition, the current electricity package structure system of China, which is gradually liberalizing its electricity market, remains imperfect. This paper establishes a model of residential electricity packages that considers load difference penalty during peak and off-peak seasons. First, consumers’ utility of different packages is established and thus the optimal is determined by maximizing the utility function. Then, a mathematical model focusing on the minimization of load difference of retail electricity packages during peak and off-peak seasons is established. We thus design a particle-swarm based algorithm to solve the problem. Through simulation results of several numerical examples, we demonstrate that the profit of retailer is increased by 37.35% and Load difference during peak and off-peak seasons is reduced by 78.01%, improving the power demand curve of users and the operation efficiency of power systems.

Newsvendor model with voucher sales: a distributionally robust approach

AbstractVouchers as a popular short‐term marketing tool are widely used by many firms, through which retailers can lock in customers and obtain working capital in advance. Consumers can use the voucher to reduce the product purchase price to an equal face value or purchase the product at a discount. We apply the classical newsvendor model to study the merits of vouchers for the retailer's ordering decision in the face of uncertainties in both the market demand and voucher redemption rate. We propose a distributionally robust approach to solve this newsvendor problem. The approach only requires the first and second moments of the demand and redemption rate distributions and yields a lower bound on the expected profit. Specifically, we derive the optimal ordering decision in closed form and obtain the optimal expected profit based on the limited distribution information. We find that a higher redemption rate does not necessarily increase the retailer's profit and the voucher quantity, but always increases the retailer's order quantity. Interestingly, we show that when the buyback price of the voucher is relatively high, increasing the voucher redemption rate is more profitable for the retailer. In addition, the retailer's profit, and the quantities of the product and the voucher decrease with the buyback price of the voucher.

Manufacturer encroachment and quality investment decisions in a two‐period supply chain

AbstractWith the development of Internet technology, many manufacturers encroach into the retail market by selling products directly to consumers, which is called manufacturer encroachment. In practice, the manufacturer may encroach in normal sales period, markdown period, or both periods in a two‐period supply chain. It is a challenging task for the firm manager to provide appropriate quality level under different channel structures. This research originally studies manufacturer encroachment with endogenous quality investment decision in a two‐period supply chain considering that consumers' valuation of products depreciates over time. Using a game‐theoretic framework, this work explores four channel strategies of the manufacturer and discusses equilibrium decisions and profits. The analysis generates several insights. First, the manufacturer should promote quality investment if encroachment occurs when the direct selling is efficient. Second, regardless of which period and scenario, encroachment may increase wholesale price when the direct selling cost is smaller than a threshold. Third, results show the effect of encroachment time on price could be classified into quality investment effect, wholesale price effect, and channel‐adding effect. The quality investment effect increases retail price, while the channel‐adding effect and wholesale price effect decrease retail price. Finally, results reveal that encroachment is always the best choice for the manufacturer and it does not always harm the retailer's profits. Overall, our results and managerial insights can help the manufacturer to formulate channel strategies, wholesale price, and selling quantity decisions while help the retailer to make order quantity decision.

When can a manufacturer benefit from adding a direct sharing channel?

With the rapid development of sharing economy, the manufacturer has begun to establish direct sharing channels in addition to their existing distribution channels via independent retailers. Motivated by this business practice, this paper aims to answer the following questions: whether and when should a manufacturer establish a direct sharing channel? To this end, we first analyze a supply chain where a manufacturer distributes her product only through a retailer (the M-S Model), where we obtain the optimal retail price. Next, we consider the scenario where the manufacturer sets up a direct sharing channel in addition to the retail channel (the MR-S Model), where we obtain the optimal rental price and retail price. We then study the manufacturer's channel structure choice between the M-S and the MR-S models. Our main findings include the followings. First, the manufacturer may not always benefit from establishing a new sharing channel. The manufacturer will benefit only if the operating cost of sharing channel is low. However, when the operating cost of sharing channel is below a threshold, adding the sharing channel will decrease the profit at the retail channel, resulting in channel conflict. Second, only if the operating cost of sharing channel falls into a certain interval, the manufacturer's sharing channel will decrease the retailer's profit but increase the total supply chain profit. To avoid channel conflict, the two firms can adopt an appropriate sales reward contract so that both can benefit from the sharing channel. Lastly, when both the operating cost of sharing channel and the simultaneous rental rate of consumers are low, the manufacturer even needs to produce less if she establishes a new sharing channel.

Displaying and Discounting Perishables: Impact on Retail Profits and Waste

Displaying and Discounting Perishables: Impact on Retail Profits and Waste

Analyzing an imperfect production inventory model for green products considering learning effect on screening process under advertisement dependent credit period

<p style='text-indent:20px;'>In this research work, we have developed an imperfect production inventory model under the screening process in the manufacturing system to meet the demand of quality items for the customer. Here, the novelty lies in the screening rate depending on the number of cycles and the learning effect of the workers. The motivation behind such consideration is to increase the screening rate in each subsequent cycle on account of the learning of the workers. The virtue of government policy is to keep the environment free from pollution, nowadays the production of green products is very essential although this can lead to higher production costs for the manufacturer. As a result, customers also have to pay higher purchasing costs. So, to motivate the customers extensively to buy a green product, awareness about such product is very essential. In this regard, the manufacturer adopts an innovative advertising policy, which is another novelty of this research work. Ultimately, the demand function depends on the green degree, advertisement frequency and the retailer's selling price. It is also noted that in the present competitive business market the manufacturer offers an incentive to their retailers to carry on their business smoothly. In this regard, a credit period policy of logistic nature has been taken. Finally, an integrated profit function has been developed and its feasibility has been justified taking a numerical example. The result indicates that not only an appropriate advertisement frequency but also a suitable level of the green degree of the product is more important for maintaining the integrated profit of the system and individual profit of the retailer and the manufacturer also. We have analyzed the impacts of the retailer's advertisement frequency on the optimal credit period and the retailer's profit. We have also analyzed how the learning rate of the workers affects the screening cost and the manufacturer's profit.</p>

A game theoretic strategic model for understanding the online-offline competition and fairness concern under community group buying

<p style='text-indent:20px;'>The continuous growth of e-commerce leads to the emergence of a new supply chain model known as community group buying, which is advantageous to address the inefficiencies and higher costs of intermediate processes. However, its appearance results in fairness concerns for other participating merchants. In this regard, we construct a model with two suppliers, one wholesaler, and two retailers for three different scenarios of the initial status, fairness neutrality, and fairness concern, and comparatively analyze the game equilibria in different scenarios. The results show that the profits of the suppliers and the wholesaler significantly increase after the online retailer enters into the market, whereas the offline retailer's profit has multiple prospects. The online retailer's entry into the marketplace weakens the market position of the offline retailer and significantly erodes its pricing advantage. Additionally, our paper finds that the entry of the online retailer is beneficial for social welfare, and investment conversion efficiency on the platform construction is the core factor for the improvement of social welfare. On the contrary, the influence of fairness concern on social welfare is quite limited and only affects the internal distribution of benefits.</p>

Optimal decisions on price and inventory for a newsboy-type retailer with identifiable information and discount promotion.

Consider a retailer selling a seasonal item, new items are stocked at the beginning of sale season and no inventory replenishment is permitted. Assuming the initial price is exogenous and the information about demand becomes more accurate as the sales season progresses, the retailer is allowed to make an in-season price adjustment after conducting a review. After the review time, if the price is adjusted to be lower than the initial price, demand increases more quickly with price decreasing which reflects the promotional effect of discount. Given the initial inventory, an optimal price adjusting model is proposed to maximize the retailer's revenue. Taking decisions on inventory into account, the proposed model is extended to maximize the retailer's profit rather than revenue. Numerical examples are also illustrated to test the proposed model. The results show that the optimal in-season price mainly depends on the proportion of the remaining demand, the price sensitivity, and the effect of sales promotion. An important managerial implication is that the retailer should gather the demand information about the price and raise the in-season price as soon as possible to gain more revenue when the price elasticity is small enough. Otherwise, when the price elasticity is larger, the retailer should maintain or decrease the price to gain more revenue.

Entry game in supply chains with yield uncertainty

<p style="text-indent:20px;">Yield uncertainty presents great challenges to supply chain management, which affects market supply and thus the profits of all the supply chain parties. In the context of a supply chain comprising a retailer and multiple potential suppliers with random yields, we examine the impact of yield uncertainty on the suppliers' entry decisions, and how it affects the retailer's profit and consumer surplus. We find that yield uncertainty initially increases the number of suppliers entering the market, then decreases, and it is negatively correlated with consumer surplus. We also analyze how the retailer's purchasing price strategy influences the suppliers' decisions to enter the market. We find that retailer subsidies can improve the performance of and coordinate the supply chain. In addition, the subsidy contract is in the forms of production subsidy and surplus subsidy when the suppliers do not make and make production decisions, respectively.</p>

Producing two substitutable products under a supply chain including two manufacturers and one retailer: A game-theoretic approach

<p style='text-indent:20px;'>In the current study, a supply chain structure is considered consisting of duopolistic manufacturers and monopolistic retailer. In the considered structure, the manufacturers product two substitutable products and deliver them to end customers. One of the manufacturers sells his/her products only through the common retailer whereas another one sells directly to customers as well as through the common retailer. Obviously, a competitive behavior is established in order to price the products under the considered supply chain. In this point of view, a game-theoretic approach is applied including Nash, Manufacturers-Stackelberg, and Retailer-Stackelberg games to analyze the pricing decisions. Then, the equilibrium strategies obtained from the investigated games are discussed and some insights are presented. The results indicate that Manufacturers-Stackelberg and Nash games respectively lead to the highest and the lowest profits for the manufacturers and the whole system. Furthermore, the highest profit for the common retailer is obtained from Retailer-Stackelberg game.</p>

Evaluating pricing strategies for premium delivery time windows

In the challenging environment of attended home deliveries, pricing delivery options can play a crucial role to ensure profitability and service quality of retailers. To differentiate between standard and premium delivery options, many retailers include time windows of various lengths and fees within their offer sets. Even though customers prefer short delivery time windows, longer time windows can help maintaining flexibility and profitability for the retailer. We classify pricing strategies along two dimensions: static versus dynamic price setting and whether an offer set can include one or multiple price points. For static pricing, we implement price configurations that reflect current business practice. For the dynamic pricing, we adapt routing mechanisms that consider the flexibility within the underlying route plan during the booking process and set delivery fees accordingly. To evaluate the pricing strategies under plausibly realistic conditions, we model customer behavior through a nested logit model. This model represents customer choice as sequential decisions between premium and standard time windows. We perform a computational study considering realistic travel and demand data to investigate the effectiveness of static and dynamic time window pricing. Finally, we offer managerial insights and an outlook into applying strategic analysis to decide on price setting strategies.

Pricing and carbon emission reduction decision in dual-channel supply chain with carbon tax and consumer preference

With the development of society and economy, the production methods that consuming a lot of resources are gradually unable to meet the needs of modern life. And with the rise of consumers' awareness of environmental protection, more and more low-carbon production of manufacturers have been put forward. In order to encourage manufacturers to product with low carbon, the carbon tax policy is proposed. Under the pressure of the new policy and consumers' environmental awareness, manufacturers' production decisions will face many challenges. In addition, the rapid development of the Internet and the popularity of online shopping have also enabled manufacturers to engage in online direct sales, which has many impacts on traditional retail. Under such circumstances, consumers' channel preferences will also have many influences on manufacturers' production decisions. Therefore, it is necessary to study the influence of carbon tax, consumer green preference and channel preference on supply chain members. Therefore, this study constructs a dual-channel supply chain model consisting of a single manufacturer and a retailer to determine the optimal pricing of supply chain members and minimum carbon emissions of the manufacturer in the two scenarios of centralized decision-making and decentralized decision-making, respectively. The impact of consumers' environmental awareness, carbon tax rates and consumers' channel preferences on the carbon emissions of products and the profits of manufacturers and retailers are analyzed. The research results show that: when the carbon tax rate is low, with the rising of consumers' awareness of environmental protection and carbon tax, it is necessary to increase the carbon tax on clean manufacturers to enable them to take more market share, and increase the carbon tax on low carbon emission manufacturers to force them to make more efforts on clean manufacturing. Besides, low-carbon taxes should be imposed on medium carbon emission manufacturers to avoid them from going back to high-polluting production, and on high carbon emission manufacturers, so that they will have more funds to carry out cleaner production reforms. Besides, shopping online should be encouraged.

Low carbon decision-making model under the combined effect of corporate social responsibility and overconfidence

This paper explores the impact of retailers' corporate social responsibility (CSR) and manufacturers' overconfidence on manufacturers' carbon reduction in sustainable supply chains. We analyze the profits of manufacturers and retailers under different scenarios and explore the social welfare and environmental impacts under CSR. Our results suggest that retailers' CSR and manufacturers' overconfidence contribute positively to promoting carbon mitigation and reducing environmental impacts under certain conditions. However, with increasing CSR and manufacturer overconfidence levels, manufacturers are more likely to lead to worse environmental impacts and carbon emission reduction. In addition, we show that when the manufacturer's overconfidence level is high, manufacturers and retailers are more profitable and contribute to carbon emission reductions in the manufacturer without overconfidence (retailer without CSR) scenario. Moreover, we find that firms have the higher potential to capture optimal overall social welfare in the presence of retailers with CSR and manufacturer overconfidence.

Dual-channel supply chain coordination strategies considering electricity quality

<p style='text-indent:20px;'>The introduction of tradable electricity platforms in China has enriched the channels for consumers to purchase electricity and intensified the competition among channels. The quality of electricity is an essential factor affecting consumer purchasing behavior. This paper mainly focuses on the influence of the competition among channels on electricity quality.We construct a dual-channel electricity supply chain, in which electricity generators sell electricity directly to consumers or resell it through electricity retailers. We use the backward induction method of game theory to solve the equilibrium solutions in centralized, decentralized, and coordinated decisions. By analyzing and comparing the equilibrium solutions, we draw the following conclusions; (1) Electricity quality, electricity price, electricity demand, and profits increase with the sensitivity coefficient of electricity quality and price competition coefficient. (2) Electricity quality, electricity price, electricity demand, and profits decrease with the investment cost coefficient of quality improvement. (3) The increase in transmission and distribution costs reduces the electricity quality while increasing the electricity price through both channels. Furthermore, the increase leads to an increase in electricity demand and the profit of the electricity retailer through the resale channel. However, it reduces the electricity demand and the profit of the electricity generator through the direct sales channel. (4) A combined contract consisting of revenue sharing and quality improvement investment cost-sharing can lead to coordination.</p>

Research on Pricing Decision of Fresh Agricultural Products Supply Chain Based on Consumers’ Green Consumption Preference

Based on the background of the optimal pricing of the supply chain of graduate fresh agricultural products, this paper constructs the Stackelberg game model that maximizes the profit function of suppliers and retailers, and discusses the optimal pricing decisions of suppliers and retailers under the condition of comprehensively considering consumers’ green consumption preferences and other influencing factors. Green consumers’ green spending preferences are positively correlated with the profits of supply chain manufacturers and retailers. Numerical experiments verify the verification results of this paper, and finally summarize the relevant conclusions, green consumption preference is conducive to the overall profit improvement of the supply chain.

Differential Game Analysis of Emission Reduction and Preservation in the Tertiary Food Supply Chain under Different Government Subsidy Models

Climate change has brought about huge environmental problems and economic losses worldwide, and low carbon has become a hot topic of research in the context of the climate crisis. The article outlines a three-tier food supply chain consisting of suppliers, manufacturers and retailers, based on a cooperative model in which manufacturers share the cost of emission reduction and retailers share the cost of freshness. The study finds that when the government grants the maximum amount of subsidies to the manufacturer, the government’s decision to reduce emissions, the government’s regulations to preserve freshness, and the government’s profits are not affected. The study found that when the government awarded the largest subsidy coefficient to manufacturers and the smallest subsidy coefficient to retailers, the non-specific one-off government subsidy model could lead to higher profits for suppliers, manufacturers, and retailers, increasing the amount of emission reduction while improving the preservation quality of food. When the government subsidy factor for manufacturers is minimal, the reduction in emissions is greater under the government’s dedicated abatement subsidy model but does not increase the freshness quality of the food; food supply chain players consistently produce higher levels of preservation effort and preservation quality under the government’s non-dedicated one-off subsidy model.

Optimal retail sales strategies for old and new products in monopoly and horizontal competition scenarios

Advances in technology have made product updates more frequent and allowed consumers to choose different versions of the same product based on their preferences. It is crucial for retailers to understand how to formulate optimal sales strategies based on those different consumer preferences. To this end, we develop game models that consider the heterogeneity of consumer preferences under both monopoly and horizontal competition scenarios and perform the sensitivity analysis to examine the impact of consumer proportions and consumer preferences on retailers’ sales strategies. The results show that (i) regardless of competition or monopoly status, the original retailer can always maximize profit by setting prices based on the market share of traditional consumers, as long as the retailer sells both new and old versions of the product; (ii) the greater the competitive advantage of the competitor, the more advantageous the hybrid sales mode; (iii) if the price of the old product is below a certain threshold, there will be a positive profit for the original retailer when selling both the old and new products; and (iv) when consumer acceptance of competing retailers is lower, entering the retail market is not a good choice for competing retailers.

Buy-One-Get-One Promotions in a Two-Echelon Supply Chain

Buy-one-get-one (BOGO) promotions have become popular. With BOGO, the first unit is sold for the regular price, and the second unit is discounted. We analyze BOGO in manufacturer–retailer supply chains. We identify conditions under which BOGO outperforms price reduction (PR) and everyday low price (EDLP) policies. We find that, for some products, whether consumers stockpile or not, if BOGO and PR have the same market size, BOGO has a larger retailer profit and the same or larger manufacturer profit because BOGO induces more consumers to buy and consume two units. When consumers stockpile, the retailer sets prices to prevent such behavior, and the retailer’s share of supply chain profits is largest under BOGO, whereas consumer surplus with BOGO is smaller than PR. We also find that BOGO reduces double marginalization. When PR expands market size more than BOGO, BOGO’s effectiveness diminishes. When consumers stockpile without increasing consumption and/or production cost is high, EDLP is best. Our results are robust to multiperiod with single-promotion-period settings. A large number of regular-price periods following a promotion period increases stockpiling, which erodes the retailer’s profit and favors EDLP. If promotions are offered for consecutive periods, a larger number of promotion periods increases PR’s efficacy relative to BOGO. Time-inconsistent consumers increase stockpiling and make PR outperform BOGO. Heterogeneous consumers’ holding cost and marginal utility prevent retailers from perfectly discriminating among consumers who make profit-reducing choices. Compared with retailers’ BOGO, manufacturers’ BOGO increases double marginalization and decreases retailers’ and manufacturers’ profits and consumer surplus. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: This work was partially supported by the National Science Foundation of China [Grants 71972026, 72101102]. Y. Li’s work was supported by the China Scholarship Council [Grant 201806070094]. Supplemental Material: The online companion and data are available at https://doi.org/10.1287/mnsc.2022.4638 .

Altruistic production and distribution planning in the multilayer dual-channel supply chain: Using an improved NSGA-II with lion pride algorithm

To achieve long-term stable development of the supply chain with online and retail channels, manufacturers may employ altruistic pricing strategies to increase retailers’ interests while considering their own interests. Therefore, this work creates a mixed-integer linear programming (MILP) model for planning altruistic production and distribution for a manufacturer in a multilayer dual-channel supply chain, while maximizing the total profit of both the manufacturer and retailers and the order fulfillment rate from the manufacturer to retailers. Different from previous works using fixed altruistic pricing, this model allows flexible altruistic pricing. Since MILP is NP-hard, this work further solves this problem by an improved nondominated sorting genetic algorithm II (NSGA-II) with lion pride algorithm (LPA), in which the NSGA-II is commonly used for solving bi-objective optimization problems; the LPA adopts the slope index measure to resolve the difficulty in distinguishing the solutions with similar performance at the later stage of the NSGA-II; and multiple crossover and mutation operators are integrated to increase diversity of solutions. Simulation results show that as compared with the selfish pricing strategy, the proposed altruistic pricing strategy significantly increases the proportion of the profit of retailers, so that the channel conflict between the manufacturer and retailers can be alleviated.