Dynamic marketing model: optimization of retailer’s role

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Abstract

We study a vertical control distribution channel in which a manufacturer sells a single kind of good to a retailer. The state variables are the cumulative sales and the retailer’s motivation. The manufacturer chooses wholesale price discount while retailer chooses pass-through. We assume that the wholesale price discount increases the retailer’s sale motivation thus improving sales. In contrast to previous settings, we focus on the maximization of retailer’s profit with respect to pass-through. The arising problem is linear with respect to both cumulative sales and the retailer’s motivation, while it is quadratic with respect to wholesale price discount and pass-through. We obtain a complete description of optimal strategies and optimal trajectories. In particular, we demonstrate that the number of switches for change in the type of optimal policy is no more than one.

Original languageEnglish
Title of host publicationOptimization and Applications - 9th International Conference, OPTIMA 2018, Revised Selected Papers
EditorsYury Kochetov, Michael Khachay, Yury Evtushenko, Vlasta Malkova, Mikhail Posypkin, Milojica Jacimovic
PublisherSpringer-Verlag GmbH and Co. KG
Pages399-414
Number of pages16
ISBN (Print)9783030109332
DOIs
Publication statusPublished - 1 Jan 2019
Event9th International Conference on Optimization and Applications, OPTIMA 2018 - Petrovac, Montenegro
Duration: 1 Oct 20185 Oct 2018

Publication series

NameCommunications in Computer and Information Science
Volume974
ISSN (Print)1865-0929

Conference

Conference9th International Conference on Optimization and Applications, OPTIMA 2018
CountryMontenegro
CityPetrovac
Period01.10.201805.10.2018

Keywords

  • Pass-through
  • Pricing
  • Retailer
  • Sale motivation

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