chopra2ndeditioncha有pter10.ppt.pptVIP

* Notes: * Notes: * Notes: * 13 Notes: 10-* Quantity Discounts WhenFirm Has Market Power The two stages coordinate the pricing decision p = $4, CR=2, Demand = 120,000 bottles, Profit = PM+PR=0+240,000 = $240,000 ($60,000 higher.) The SC profit is lower if each stage of the SC independently takes its pricing decisions with the objective of maximizing its own profit! M R CR p CM 10-* Pricing Schemes for Coordination: Firm has Market Power Retailer DO acts in a way to maximize its own profits. Design a two-part tariff that achieves the coordinated solution Design a volume discount scheme that achieves the coordinated solution Impact of inventory costs Pass on some fixed costs with above pricing 10-* Two Part Tariff Manufacturer charges his entire profit as an up-front franchise fee and then sells the retailer at cost. It is then optimal for the retailer to price as though the two stages are coordinated. Ex: With coordination SC Profit=$240,000 Without Coordination PR=$60,000 Manufacturer charges up-front fee of $180,000 and set CR=2. Retailer maximizes PR when p=$4/bottle and his net profit is $240,000-$180,000=$60,000. 10-* Volume Based Quantity Discount Two part tariff is actually a volume based quantity discount. Here the objective is to price in a way that the retailer buys the total volume sold as if the two stages coordinate pricing. Ex: With coordination demand=$120,000 bottles /year. Manufacturer offers Then it is optimal for DO to order 120,000 units at set p=$4/unit. So, PR= $60,000, PM= $180,000 and SC Profit=$240,000. 10-* Lessons from Discounting Schemes For commodity products, lot size based discounts are justified to achieve coordination. For the products where a firm has market power, lot size based discounts are not optimal even in the presence of inventory costs. Volume based discounts with some fixed cost passed on to retailer are more effective. Lot size based discounts tend to raise the cycle inventory in the