Suchergebnisse

ABSTRACTTo entice customers to purchase both current and new generation products over time, many firms offer different trade‐in programs including programs that require customers to pay an up‐front fee. To examine the effectiveness of the trade‐in programs, we develop a two‐period model in which a firm sells the first generation product in the first period and the second generation product in the second period; however, the firm offers a trade‐in program that customers can participate in when purchasing the first generation product in the first period. To participate, each customer has to pay a nonrefundable fee in the first period so that she has the option to trade‐in her first generation product and receive a prespecified trade‐in value to be used for the purchase of the second generation product in the second period. To capture market heterogeneity and market uncertainty, we examine the case when the valuation of the first generation product varies among customers and the valuation of the second generation product is uncertain a priori. By analyzing a two‐period game, we determine the optimal purchasing behavior of each rational customer, and we show that the firm is always better off by offering its own trade‐in programs. Also, our numerical analysis reveals that trade‐in programs can benefit the firm significantly especially when (i) the residual value of the first generation product is high; (ii) the expected incremental value of the second generation product is high; or (iii) the valuation of the second generation product is highly uncertain.

ABSTRACTWe examine how a supply chain firm may implement an incentive contract under inventory consignment to recover stockouts and to retain customers. Inventory consignment allows an upstream firm (e.g., a manufacturer) to own and control inventory at a downstream firm (e.g., a retailer), representing a structural change in supply chain governance. Motivated by cases in pet toy and electronics component industries, we formulate principal–agent models based on the newsvendor framework to capture the strategic interactions in a supply chain. We find that consignment can be effective in reducing stockouts because the ownership and control of the product by the manufacturer allows better prevention of stockouts, which complements stockout recovery and leads to fewer stockouts. However, the lower level of stockout under consignment does not necessarily translate into profitability—when the manufacturer is highly opportunistic, that is, readily exploring outside opportunities for its product, consignment may lead to lower profitability for both the manufacturer and the supply chain. On the other hand, consignment will improve profitability for the manufacturer and the supply chain, if both the manufacturer opportunism and the retailer opportunism are moderate.

ABSTRACTTo entice consumers to purchase both current and next generation products, many manufacturers and retailers offer trade‐in programs that allow buyers of the first generation product to trade‐in the product and purchase the new generation product at a lower price. By considering the interactions between "forward‐looking" consumers and a firm when a trade‐in program is offered, we analyze a two‐period dynamic game to determine the optimal prices of two successive‐generation products in equilibrium, and examine the conditions under which trade‐in programs are beneficial to the firm. Our model incorporates market heterogeneity (valuation of the first generation product varies among the consumer population), product uncertainty (the incremental value of the new product is uncertain before its introduction), and consumers' forward‐looking behavior (consumers take future product valuation and prices into consideration when making purchasing decisions). With the trade‐in option, we show that consumers are willing to pay a price that is higher than their valuations of the current product. Furthermore, trade‐in programs are more beneficial to the firm when: (i) the durability of the current product is high; (ii) the market heterogeneity is low; or (iii) the uncertainty level (or the expected incremental value) of the new product is high. Finally, when the incremental value of the new product is more uncertain, consumers are more willing to purchase the current product because of the "option" value of the trade‐in programs and thus trade‐in programs can be more beneficial to the firm in this case.

ABSTRACTRecent research suggests that the sales rate of a product would increase immediately after a seller posts a "scarcity message" to alert potential consumers that there are only a few units left in inventory. Knowing this effect, should an online seller post scarcity messages? In this technical note, we develop and analyze a variant of the Economic Order Quantity (EOQ) model to capture this effect in an environment involving the sale of slow moving items. Our result suggests that, in general, posting scarcity messages is beneficial only for products with high or low retail margins. Scarcity messages will not be beneficial for products with moderate retail margins because the resulting extra ordering/inventory cost per unit of time outweighs the resulting extra gross profit per unit of time for these products.