The Model of Optimal Price and Leadtime in the Decentralized Setting

This paper investigates a firm with two independent functions, marketing and production, which serves customer demand that is sensitive to both price and leadtime. Price and leadtime decisions are made by marketing and production, respectively. We develop a new model that integrates pricing and delivery leadtime decisions constrained by capacity expansion cost, where substitution effect on competition is considered. In our model, we capture the optimal price and leadtime decisions in the decentralized setting. A numerical example is given to illustrate some helpful results.