Advances in Industrial Engineering

Advances in Industrial Engineering

Gift Card Pricing through its Pre-sales and Ordering Decisions in a Two-echelon Supply Chain with a Separate Sales Channel and Price-sensitive Demand

Document Type : Research Paper

Authors
Mohsen Lashgari 1
Seyed Jafar Sadjadi 2
Mahdi Heydari 2
1 School of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran
2 School of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran.
10.22059/aie.2022.342830.1837
Abstract
The high popularity and profitability of gift cards encourage many sellers to use them to sell their goods. Retailers have also been encouraged to use independent third parties to sell their gift cards for increasing their sales channel and taking advantage of it. This paper develops a two-echelon supply chain for gift card incentive policy, with a third party and retailer at the first level and a supplier at the second one. The most important research questions are as follows: order amount of chain members to maximize their own and the whole chain profit, gift card prices by the retailer to its customers, gift card prices by the retailer to third party, and gift card prices by the third party to customers. Stackelberg's approach is used to solve the model, assuming that the third party is the follower and the retailer is the leader. In addition, by proving the concavity of the objective function, obtaining the closed-form solution for variables, and proving the resulting solutions, an algorithm has been developed to achieve the optimal answer. Findings showed that the use of cards in the case of economic order models increases the demand for retail and on the other hand attracts more customers and better brand expansion. A numerical example as well as a sensitivity analysis are performed to describe the model. Finally, conclusions as well as suggestions for future research are provided.
Keywords
Gift Card
Supply Chain
Incentive Policy
EOQ Model
Third Party
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Advances in Industrial Engineering
Volume 57, Issue 1
June 2023
Pages 35-73