Authors: Michael Vidalis

Title: Integrated vs Disintegrated Pricing and Revenue Optimization for innovate products in the supplier-buyer problem

Abstract

A supply network is essentially a set of inter-connected suppliers and customers. In such a network, every node/customer is a supplier of the next downstream node(s)/customer(s), until the end product reaches the ultimate consumer or end user. Supply chain management (SCM) involves the management of products, capital and information flows along the stages of a supply chain, so as to maximize total expected profitability

This work investigates the performance (profit) of a fully integrated chain where a single decision maker interested in the profit of the supply chain makes all decisions regarding the price with those of a nonintegrated chain where each decision maker makes his/her own  decisions to maximize the profit of his/her own organization.

Our investigation highlights the observation that the supply chain profit is lower if each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit. We describe optimal pricing (percent of markup over marginal cost) for all stages in order to maximize supply chain profit under condition that the demand curve is price sensitive. The work suggests ways to disappear the negative effects of double marginalization by coordinated double ma1ginalization and two-part tariff policies.