Dynamic slotting and pricing decisions in a durable product supply chain (Q946186)

The paper studies a supply chain in which a manufacturer sells an innovative durable product to an independent retailer over its life cycle. The problem is defined as a Stackelberg differential game where the manufacturer is the leader who decides about the wholesale price and the retailer is the follower who decides about the retail price and the shelf-space allocation. The product demand follows a Bass-type diffusion process. Two cases of problem optimization are considered. In both of them the manufacturer maximizes the life-cycle profit, while in the first one the retailer maximizes the current period profit and in the second one the retailer maximizes the life-cycle profit. The paper gives the exact formulas for the optimal trajectories of wholesale price, retail price, instantaneous sales rate and shelf-space allocation in both cases. According to this formulas, the numerical results and corresponding graphs are given. Many interesting and surprising conclusions are derived. At the end some opportunities for future research are presented. The paper is very well organized, clearly written and very concise. The mathematical formulas are derived and explained very good. They are very easy to follow. The economics interpretation is very logic. Because of this the paper represents good source for students and researches who wants to study supply chain problems. One can find the inspiration for further work wanting to start immediately.