Coordination in vendor-buyer inventory systems: on price discounts, Stackelberg game and joint optimisation
Date of Issue2009
College of Business (Nanyang Business School)
We consider a version of the Stackelberg game that is used to model discount pricing decisions in vendor-buyer supply chains. The game consists of a leader who is selling a product to one (or more) follower(s) who in turn sell it to the ultimate consumers. We define conditional strategy for the leader as a strategy where the transfer price offered by the leader is conditional upon the specific decision taken by the follower. We show that the leader's optimal conditional strategy can achieve perfect coordination. We then discuss the application of the result to specific models for discount pricing decisions in vendor-buyer inventory systems and interpret its implications for these models.
International journal of operational research
© 2009 Inderscience. This is the author created version of a work that has been peer reviewed and accepted for publication by International Journal of Operational Research (IJOR), Inderscience. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [http://dx.doi.org/10.1504/IJOR.2009.026246].