A Decision Supp Ort System For Group Buying

MANAGEMENT SCIENCE Vol. 35, No. 6. Junc 1989 in IPrinted U.S.A. A cooperative GAME THEORY MODEL OF QUANTITY DISCOUNTS* RAJEEV KOHLI AND HEUNGSOO PARK Joseph M. Katz squeeze School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania 15260 College of Business and Economics, Yonsei University, Seoul, Korea Quantity discounts offeredby a monopolizer are consideredin the context of a bargainingproblem in which the buyer and the vendor negotiate over the order quantity and the average unit of measurement value. All-units and incremental quantity discounts that permit transaction at a negotiated outcome are described. The effects of risk esthesia and bargainingpower on quantity discounts are discussed for alternative bargaining models. (MARKETING-DISTRIBUTION; MARKETING-PRICING; negotiate; line/PRODUCTION-EOQ) 1. Introduction Quantity discounts are often apply in pricing policies. Rachman (1975) and Howell, Kuzdrall, Britney and Wilcox (1986) note their wid espread use and their splendor to market strategy. Rao (1980) adumbrates that quantity discounts should take into account inflation, mergersamong buyers, and increased sophistication in buyers orderingpolicies. Heirritz and Farrel (1971) examine quantity discounts from the purchasers viewpoint, urging buyers to take prefer of discounts because the price differentials can be significant. Researchers in marketing and economics suggest three main reasons for quantity discounts: (i) perfect inconsistency against a single buyer or a analogous multitude of buyers (Buchanan 1953, Gabor 1965, Moorthy 1984), (ii) partial discrimination against a heterogeneous collection of buyers (Oi 1971, Leland and Meyer 1973, Faulhaber and Panzar 1977, spud 1977, Spence 1977, Oren, Smith and Wilson 1982, 1983), and (iii) improved efficiency of transactions between a seller and a buyer (Crowther 1964, Foraker 1961, Dolan 1978, Lal and Staelin 1984, Monahan 1984, Lee and Rosenblatt 1986, pappa a nd Srikanth 1987). Dolan (1987)...If you fa! tality to get a full essay, order it on our website: OrderCustomPaper.com

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