Profit maximization in a multi-product firm with impatient customers

E. J. LEVIN, Yue MA, R. E. WRIGHT

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

2 Citations (Scopus)

Abstract

In this paper, the standard model of profit maximization is extended to include multi-product production in a market characterized by impatient customers. A formal model is presented that includes price, delivery frequency, production run length per set-up and product range as endogenous variables. The model facilitates the analysis of the complex interactions between these variables and highlights the inherent problems relating to profit maximization. For example, offering a broader range of products and/or more rapid delivery may seem to be a sensible response for a multi-product firm with impatient customers in a scenario of depressed demand. However, the analysis shows that such strategies could be counterproductive.
Original languageEnglish
Pages (from-to)211-218
Number of pages8
JournalJournal of the Operational Research Society
Volume55
Issue number3
DOIs
Publication statusPublished - 1 Jan 2004

Fingerprint

Profitability
Profit maximization
Multiproduct firms
Scenarios
Endogenous variables
Interaction
Formal model

Keywords

  • Delivery lags
  • Economics
  • Inventory
  • Manufacturing
  • Multi-product
  • Pricing

Cite this

LEVIN, E. J. ; MA, Yue ; WRIGHT, R. E. / Profit maximization in a multi-product firm with impatient customers. In: Journal of the Operational Research Society. 2004 ; Vol. 55, No. 3. pp. 211-218.
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Profit maximization in a multi-product firm with impatient customers. / LEVIN, E. J.; MA, Yue; WRIGHT, R. E.

In: Journal of the Operational Research Society, Vol. 55, No. 3, 01.01.2004, p. 211-218.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AB - In this paper, the standard model of profit maximization is extended to include multi-product production in a market characterized by impatient customers. A formal model is presented that includes price, delivery frequency, production run length per set-up and product range as endogenous variables. The model facilitates the analysis of the complex interactions between these variables and highlights the inherent problems relating to profit maximization. For example, offering a broader range of products and/or more rapid delivery may seem to be a sensible response for a multi-product firm with impatient customers in a scenario of depressed demand. However, the analysis shows that such strategies could be counterproductive.

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