Optimal Discounting and Replenishment Policies for Perishable Products
We consider a retailer, selling a perishable product with short shelf-life and uncertain demand, facing these key decisions: (a) whether to discount old(er) items, (b) how much discount to offer, and (c) what should be the replenishment policy. In order to better understand the impact of consumer be...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
| Published: |
2017
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/84092 http://hdl.handle.net/10220/42959 |
| _version_ | 1811689751340646400 |
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| author | Chua, Geoffrey Ang Mokhlesi, Reza Sainathan, Arvind |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Chua, Geoffrey Ang Mokhlesi, Reza Sainathan, Arvind |
| author_sort | Chua, Geoffrey Ang |
| collection | NTU |
| description | We consider a retailer, selling a perishable product with short shelf-life and uncertain demand, facing these key decisions: (a) whether to discount old(er) items, (b) how much discount to offer, and (c) what should be the replenishment policy. In order to better understand the impact of consumer behavior and shelf-life on these decisions, we consider four models. In Model A, the product has a shelf life of two periods and the retailer decides whether or not to offer a discount. The amount of discount is exogenous and assumed to be large enough so that all the customers prefer the old product to the new one when a discount is offered. Based on several numerical examples, we find that a threshold discounting policy, in which a discount is offered if and only if the inventory of old product is below a threshold, is optimal. In Model B, the retailer also decides how much discount to offer. Model C extends Model B and considers a new pool of customers who are willing to purchase from the retailer when a discount is offered. In both Models B and C, the product has a shelf-life of two periods while Model D explores what happens with longer shelf-life. We analyze and compare these models to present different managerial insights. |
| first_indexed | 2024-10-01T05:53:05Z |
| format | Journal Article |
| id | ntu-10356/84092 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T05:53:05Z |
| publishDate | 2017 |
| record_format | dspace |
| spelling | ntu-10356/840922023-05-19T06:44:43Z Optimal Discounting and Replenishment Policies for Perishable Products Chua, Geoffrey Ang Mokhlesi, Reza Sainathan, Arvind Nanyang Business School Retailing Discounting We consider a retailer, selling a perishable product with short shelf-life and uncertain demand, facing these key decisions: (a) whether to discount old(er) items, (b) how much discount to offer, and (c) what should be the replenishment policy. In order to better understand the impact of consumer behavior and shelf-life on these decisions, we consider four models. In Model A, the product has a shelf life of two periods and the retailer decides whether or not to offer a discount. The amount of discount is exogenous and assumed to be large enough so that all the customers prefer the old product to the new one when a discount is offered. Based on several numerical examples, we find that a threshold discounting policy, in which a discount is offered if and only if the inventory of old product is below a threshold, is optimal. In Model B, the retailer also decides how much discount to offer. Model C extends Model B and considers a new pool of customers who are willing to purchase from the retailer when a discount is offered. In both Models B and C, the product has a shelf-life of two periods while Model D explores what happens with longer shelf-life. We analyze and compare these models to present different managerial insights. Accepted version 2017-07-21T03:35:04Z 2019-12-06T15:38:10Z 2017-07-21T03:35:04Z 2019-12-06T15:38:10Z 2017 Journal Article Chua, G. A., Mokhlesi, R., & Sainathan, A. (2017). Optimal Discounting and Replenishment Policies for Perishable Products. International Journal of Production Economics, 186, 8-20. 0925-5273 https://hdl.handle.net/10356/84092 http://hdl.handle.net/10220/42959 10.1016/j.ijpe.2017.01.016 en International Journal of Production Economics © 2017 Elsevier. This is the author created version of a work that has been peer reviewed and accepted for publication by International Journal of Production Economics, Elsevier. 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/10.1016/j.ijpe.2017.01.016]. 30 p. application/pdf |
| spellingShingle | Retailing Discounting Chua, Geoffrey Ang Mokhlesi, Reza Sainathan, Arvind Optimal Discounting and Replenishment Policies for Perishable Products |
| title | Optimal Discounting and Replenishment Policies for Perishable Products |
| title_full | Optimal Discounting and Replenishment Policies for Perishable Products |
| title_fullStr | Optimal Discounting and Replenishment Policies for Perishable Products |
| title_full_unstemmed | Optimal Discounting and Replenishment Policies for Perishable Products |
| title_short | Optimal Discounting and Replenishment Policies for Perishable Products |
| title_sort | optimal discounting and replenishment policies for perishable products |
| topic | Retailing Discounting |
| url | https://hdl.handle.net/10356/84092 http://hdl.handle.net/10220/42959 |
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