Optimal replenishment and pricing decisions under the collect-on-delivery payment scheme

Authors:
Jie Zhang;Rachel Q. Zhang
Affiliations:
International School, Guangdong University of Business Studies, Guangzhou, People's Republic of China;Department of Industrial Engineering and Logistics Management, The Hong Kong University of Science and Technology, Kowloon, Hong Kong
Venue:
OR Spectrum
Year:
2014

Citing 7
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Abstract

In this paper, we study how the timing of payments affects joint replenishment and pricing decisions. Specifically, we consider a periodic review system in which consumers pay upon receiving their goods, referred to as the collect- on-delivery scheme, as opposed to paying when placing their orders, referred to as the instant payment scheme commonly assumed in the literature. We show that a base-stock list price policy is optimal without a fixed ordering cost, and provide a sufficient condition for an $$(s, S, p)$$ policy to be optimal with a fixed ordering cost. We also perform both analytical and numerical studies to compare the two schemes.