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Guanghua Forum——Optimal Pricing and Inventory Control Policy with Quantity-Based Price Differentiation

Updated : 2014-10-24

Views : 2163

Time: 2014-10-27 10:00-11:30

Place:Yidi Building H110, Liulin Campus

Topic Intruction:

A firm that faces price dependent  demand aims to maximize its profit.  In addition to the regular unit selling price, the firm can utilize quantity discounts to increase sales, such as buy-2 & get 1 free. We refer to this dual-pricing strategy as quantity-based price differentiation. The research question is why firms engage into such dual-pricing strategy and do not simply just dynamically adjust the unit selling price?  We try to address this issue by considering the following model.  At the beginning of each period, the firm needs to make three decisions: replenishing the inventory, setting the unit selling price if the unit sales mode is deployed, and setting the quantity-discount price if the quantity-sales mode is deployed (or the combination of the two modes of sales). We identify conditions under which the optimal inventory control policy and selling/pricing strategy is well-structured.  Our numerical study shows that substantial profit improvement can be gained as the result of shifting from uniform pricing to quantity-based pricing.   (Joint paper with LU Ye,  SONG Miao, and YAN Xiaoming)


Brief Introduction About Prof. Chen Youhua (Frank Y. Chen):

Youhua (Frank) Chen is Professor of Management Sciences at City University of Hong Kong. He holds a bachelor degree in Engineering, master degree in Economics, and doctoral degree in Management from Tsinghua University (Beijing), the University of Waterloo, and the University of Toronto, respectively. After finishing his PhD, he went to Northwestern University as a post-doc fellow (9/1996-6/1997). Prior to joining City University of Hong Kong, Prof. Chen was on the faculty of NUS Business School, National University of Singapore (7/1997-6/2001) and the Department of Systems Engineering and Engineering Management, the Chinese University of Hong Kong (2001-2012), as Assistant Professor and Associate Professor, respectively. Courses which Prof. Chen taught in NUS include Operations Management and Supply Chain Management, at both undergraduate and MBA levels. He was also actively involved in executive teaching (EDP and EMBA). At CUHK, he taught Logistics and Supply Chain Management, and served as the deputy director and director for the Executive Master of Science Program (EMSc) in Logistics and Supply Chain Management, a joint program with Tsinghua University (Shenzhen). Prof. Chen has also been involved in consulting projects in the area of supply chain management and logistics.