Table of Contents Author Guidelines Submit a Manuscript
Discrete Dynamics in Nature and Society
Volume 2016, Article ID 1801658, 13 pages
http://dx.doi.org/10.1155/2016/1801658
Research Article

Optimal Ordering and Pricing Policies for Seasonal Products: Impacts of Demand Uncertainty and Capital Constraint

1School of Management, Xi’an Jiaotong University, No. 28 Xianning West Road, Xi’an, Shaanxi 710049, China
2Department of Systems Engineering & Engineering Management, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong

Received 31 May 2016; Accepted 25 September 2016

Academic Editor: Jean J. Loiseau

Copyright © 2016 Jinzhao Shi et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

With a stochastic price-dependent market demand, this paper investigates how demand uncertainty and capital constraint affect retailer’s integrated ordering and pricing policies towards seasonal products. The retailer with capital constraint is normalized to be with zero capital endowment while it can be financed by an external bank. The problems are studied under a low and high demand uncertainty scenario, respectively. Results show that when demand uncertainty level is relatively low, the retailer faced with demand uncertainty always sets a lower price than the riskless one, while its order quantity may be smaller or larger than the riskless retailer’s which depends on the level of market size. When adding a capital constraint, the retailer will strictly prefer a higher price but smaller quantity policy. However, in a high demand uncertainty scenario, the impacts are more intricate. The retailer faced with demand uncertainty will always order a larger quantity than the riskless one if demand uncertainty level is high enough (above a critical value), while the capital-constrained retailer is likely to set a lower price than the well-funded one when demand uncertainty level falls within a specific interval. Therefore, it can be further concluded that the impact of capital constraint on the retailer’s pricing decision can be influenced by different demand uncertainty levels.