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Risk pooling strategy in a multi-echelon supply chain with price-sensitive demand

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Abstract

This paper studies a nonstationary inventory and pricing problem. We consider a two-echelon supply chain with one supplier and two retailers, in which the supplier carries all inventory to supply the retailers. Both the reserved and pooled inventory systems are analyzed. Results with normally distributed demands are compared. Assuming the random demand at each retailer is price-sensitive, we further consider the cases when the retailers have and do not have service level requirements. We start with analyzing inventory and pricing strategies for the supplier in a one-period scenario. Then we extend our analysis to both the backlogging and lost-sale scenarios in an infinite planning horizon.

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Authors and Affiliations

  1. School of Management, Fudan University, Shanghai, 200433, China

    Yue Dai

  2. Industrial Engineering and Operations Research, North Carolina State University, Raleigh, NC, 27695-7906, USA

    Shu-Cherng Fang, Xiaoli Ling & Henry L. W. Nuttle

  3. Mathematical Sciences and Industrial Engineering, Tsinghua University, Beijing, China

    Shu-Cherng Fang

Authors
  1. Yue Dai
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  2. Shu-Cherng Fang
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  3. Xiaoli Ling
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  4. Henry L. W. Nuttle
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Corresponding author

Correspondence to Yue Dai.

Additional information

The first author’s research is sponsored by Grant No. 70502009 and No. 70432001 of the Chinese National Natural Science Foundation and the second author’s research is sponsored by Grant #W911NF-04-D-0003 of the US Army Research Office and Grant #DMI-0553310 of the US National Science Foundation.

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Dai, Y., Fang, SC., Ling, X. et al. Risk pooling strategy in a multi-echelon supply chain with price-sensitive demand. Math Meth Oper Res 67, 391–421 (2008). https://doi.org/10.1007/s00186-007-0203-8

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  • DOI: https://doi.org/10.1007/s00186-007-0203-8

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