| dc.description.abstract | In this study, we will consider optimal decisions problem of two competitive retailers about their price decision, order quantities decision and the service level decision in a linear market. The base situation of this linear market is consisted by two retailers which are located at the end points. To maximize the pure revenues of the two retailers, we wish to find out the optimal decisions of the retail prices, the order quantities of the product and the service level (which mean how percentage of consumers’ demand can be satisfied) of the two retailers. Therefore, for obtaining the anticipant result above mentioned, we hope to solve the problem by a variety newsvendor model and Lagrange multiplier method to see which selection combination will maximize their profit.
Unlike other literature which had been proposed, the distinct idea of this study is to consider the setting of the service level of the retailer, and how this service level affect the expected profit of the retailer. In this way, we can find out the variation of retailer’s decision of retail price and order quantities of the product when the retailer also has to consider the decision of the service level. Because of these decision variables are conditioned each other, we want to find out the optimal decision combination of these variables to maximize the expected profit of the retailer.
To discuss this phenomenon we mentioned above, we derived the expected profit function by the classical newsvendor model, to see what decisions combination will create the largest profit of them. The process of building of the expected function is as follow: When the retailer decides a service level, that can affect the decision of the retail price and the order quantities of both retailers, then affect the consumers’ demand (market share) of themselves at different decisions combination. So we will derive the relationship of these decision variables first, and then find an optimal equilibrium decision combination to maximize the expected profit of the retailer. | en_US |