Essays on joint operational and marketing decisions in individual firms and supply chains.

Abstract

Traditionally, operational decisions and marketing decisions are made by separate functions in a firm. The separate decision-making can lead to a mismatch between supply and demand and hurt firms' profitability. This dissertation seeks to determine how to coordinate operational decisions and marketing decisions at the firm level and the supply chain level. The first essay considers the joint inventory and price decision problem under two pricing schemes - up-front pricing and delayed pricing - for a make-to-stock firm that sells substitutable products with uncertain demand. A new methodology is provided to characterize the optimal policy for both pricing schemes. We also consider the competitive case in which each item is managed by a different firm. The existence of a unique Nash equilibrium is identified for up-front pricing scheme while there can exist multiple Nash equilibria for delayed pricing scheme. The second essay models a two-stage supply chain with two manufacturers and one retailer, whose strategic marketing decision is product variety. A supplier pays a slotting fee if his product is carried by the retailer. The retailer incurs a fixed transaction cost for each carried product. We find that, contrary to often cited claims, use of slotting fees does not always lead to less variety or higher price. In the case when variety is indeed decreased, it is usually compensated by lower prices. While the manufacturer is always worse off with use of slotting fees, the retailer and the consumers usually benefit. The third essay focuses on make-to-order industries, and analyzes the joint due-date and price quotation problem in both monopolistic and competitive environments. In the monopolistic model a single firm quotes price and due-date to incoming customers. Customers either accept or reject the quote according to a probability function. We show the firm's optimal policy is to promise the earliest available due-date and offer a price uniquely determined by its current backlog. In the competitive model we provide conditions for Nash equilibria to exist and characterize the equilibrium due-dates and prices. Numerical study suggests that two factors dampen the intensity of competition: backlog gap between firms and the limited capacity.