Optimal replenishment and pricing decisions under the collect-on-delivery payment scheme

In this paper, we study how the timing of payments affects joint replenishment and pricing decisions. Specifically, we consider a periodic review system in which consumers pay upon receiving their goods, referred to as the collecton-delivery scheme, as opposed to paying when placing their orders, referred to as the instant payment scheme commonly assumed in the literature. We show that a base-stock list price policy is optimal without a fixed ordering cost, and provide a sufficient condition for an (s, S, p) policy to be optimal with a fixed ordering cost. We also perform both analytical and numerical studies to compare the two schemes.