Abstract
In this article, we study the newsvendor problem with endogenous setting of price and quoted lead-time. This problem can be observed in situations where a firm orders semi-finished product prior to the selling season and customizes the product in response to customer orders during the selling season. The total demand during the selling season and the lead-time required for customization are uncertain. The demand for the product depends not only on the selling price but also on the quoted lead-time. To set the quoted lead-time, the firm has to carefully balance the benefit of increasing demand as the quoted lead-time is reduced against the cost of increased tardiness. Our model enables the firm to determine the optimal selling price, quoted lead-time, and order quantity simultaneously, and provides a new set of insights to managers.
Original language | English (US) |
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Pages (from-to) | 576-589 |
Number of pages | 14 |
Journal | Production and Operations Management |
Volume | 21 |
Issue number | 3 |
DOIs | |
State | Published - May 2012 |
Keywords
- inventory
- lead-time quotation
- newsvendor problem
- pricing
- revenue management
ASJC Scopus subject areas
- Management Science and Operations Research
- Industrial and Manufacturing Engineering
- Management of Technology and Innovation