Preprint Article Version 1 This version is not peer-reviewed

Pricing to the Scenario: Price-Setting Newsvendor Models for Innovative Products

Version 1 : Received: 23 August 2019 / Approved: 26 August 2019 / Online: 26 August 2019 (12:30:03 CEST)

A peer-reviewed article of this Preprint also exists.

Ma, X. Pricing to the Scenario: Price-Setting Newsvendor Models for Innovative Products. Mathematics 2019, 7, 814. Ma, X. Pricing to the Scenario: Price-Setting Newsvendor Models for Innovative Products. Mathematics 2019, 7, 814.

Journal reference: Mathematics 2019, 7, 814
DOI: 10.3390/math7090814

Abstract

In this paper, we consider a manufacturer who produces and sells a kind of innovative product in the monopoly market environment. Because the life cycle of innovative product is usually shorter than its procurement lead time, one unique demand quantity (scenario) will occur in the selling season, thus there is only one chance for the manufacturer to determine both optimal production quantity and optimal sale price. Considering this one-time feature of such a decision problem, a price-setting newsvendor model for innovative products is proposed. Different to the existing price-setting newsvendor models, the proposed models determine the optimal production quantity and sale price based on some specific state (scenario) which is most applicable for the manufacturer. The theoretical analysis provides managerial insights into the manufacturers’ behaviors in a monopoly market of an innovative product and several phenomena in the luxury goods market are well explained.

Subject Areas

price-setting newsvendor, one-shot decision theory, innovative product, scenario, behavioral operations research

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