Journées de l'optimisation 2007 Optimizations days

Price-matching-guarantees (PMGs) are offers by firms whereby they assure that they will match any lower price offered by the competition for the same merchandise. Early economics literature illustrates that PMGs lead to tacit collusion and monopoly prices. However, in today’s competitive environment firms reserve the right to check the availability of the product at the competitor location and decline to match the lower price if the product is not available there. When demand is uncertain, verifying the availability of the product leads to a game where firms simultaneously compete on prices and order quantities. We build a duopoly newsvendor competition model and investigate the effects of demand uncertainty on PMGs and the effect of PMGs on newsvendor competition. The equilibrium solutions are compared under three scenarios; i) firms offer PMGs but don’t verify the availability, ii) firms offer PMGs as well as verify availabilities, iii) firms don’t offer PMGs.

In this paper, we analyze a typical textbook supply chain: the bookstore buys the book from the publisher at the beginning of the first period, and sells it to price-sensitive students. At the end of the first period the store buys back the used books and makes it available in the second period. The publisher can also decide to publish a new edition (at a cost) and sell it to the bookstore in the second period. On the other hand, the publisher may choose not to release a new edition; the store will then buy “new” copies of the old edition in the second period. We establish the profit-maximizing decisions for the supply chain partners assuming the publisher to be the Stackelberg leader. Our analysis sheds light on the role that buybacks play and the underlying reason behind the increased frequency of new editions and soaring prices in this industry.

This paper presents a sequential location and pricing problem for two firms, who compete on a unit line market by selling identical products so as to maximal profits. Customers have a reservation price, and customers' utility is defined as the reservation price minus mill price minus transportation cost. Each customer purchases a unit of the product from the store with a higher utility if it is nonnegative. Our focus is that given the location of the first entry firm, how the second entry firm should make the decisions of location and price with the awareness that the first entry firm will react to his entry by updating the price, as well as how the first entry firm should react. We also compare the location strategies for the first entry firm, and demonstrate that the middle of the market may not be his best location.