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This paper considers a two-stage supply chain in which a supplier serves a set of stores in a retail chain. We consider a two-stage Stackelberg game in which the supplier must set price discounts for each period of a finite planning horizon under uncertainty in retail-store demand. As a mechanism to stimulate sales, the supplier offers periodic off-invoice price discounts to the retail chain. Based...
The phenomenon in which demand variability increases as one moves upstream in the supply chain has been often observed in practice. This so-called “bullwhip effect” often increases upstream operations costs, including inventory holding and transportation costs. Price variations are considered to be one of the primary causes of the bullwhip effect, and thus everyday low price (EDLP) strategies are...
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