E- OPIM Joint Seminar
Ali Parlaktürk UNC Kenan Flagler Business School
December 21, 2012, Friday @ 13:40pm @ FENS L047
“The Value of Commitments When Selling to Strategic Consumers: A Supply Chain Perspective”
We consider a decentralized supply chain consisting of a retailer and a supplier that serves forward-looking consumers in two periods. In each period, the supplier and the retailer dynamically set the wholesale and retail price to maximize their own profits. The consumers are heterogeneous in their evaluations of the product and are strategic in deciding whether and when to buy the product, choosing the option that maximizes their utility, including waiting for a price mark-down. We derive the equilibrium and study the value of price and quantity commitments from both the retailer’s and the supplier’s perspective. We find that, while a centralized system always benefits from making price and quantity commitments, this is not true for a firm in a decentralized supply chain due to how the other firm reacts to these commitments. We show that the retailer suffers from making a price or quantity commitment and that, similarly, the supplier does not benefit from making a price commitment. In these cases, commitments can harm not only the firm itself but also profitability of the other firm in the supply chain, thereby disadvantaging the entire supply chain. This happens because such commitments aggravate double-marginalization inefficiency in the supply chain.
This is joint work with M. Onur Kabul, SAS Institute.
Ali K. Parlaktürk
The research of Ali K. Parlaktürk focuses on understanding the impact of strategic customer behavior, product choice and supply chain design on operational decisions. Dr. Parlaktürk teaches service operations and operations management. Management Science, Manufacturing & Service Operations Management and Production and Operations Management have published his research. His research on “Self Interested Customer Routing in Queueing Networks” received the honorable mention in the George Nicholson Student Paper Competition. He received his PhD in operations, information and technology from the Stanford Graduate School of Business, his MS in statistics from Stanford University, and his BS in industrial engineering from Bilkent University in Turkey.