International Conference on Commodity Markets (ICCM 2016)

1 / 2015-10-10 21:57:43

Optimal Order Quantity of The Retailer Under Different Quantity Discount of The Supplier

supplier,4193,discount,retailer

In the bilateral negotiation literature, an increasing body of work studies how buyers can make multi-issue trade-off to maximize its own expected profit. Various multi-issue negotiation models for such incentive schemes have been proposed, but a critical research ignored in this research field is that the quantity discount made by sellers could influence the order quantity of buyers. In this paper, we propose a novel bilateral two-issue negotiation model that price and quantity are negotiated. Suppliers offer the product at a given price and apply discounts according to the quantity ordered. We derive the optimal order quantity for the retailer under different quantity discount of the supplier. A numerical example is provided that illustrate the solution procedure.