A Wholesaler's Optimal Ordering and Quantity Discount Policies for Deteriorating Items

This study analyses the seller's (wholesaler's) decision to offer quantity discounts to the buyer (retailer). The seller purchases products from an upper-leveled supplier (manufacturer) and then sells them to the buyer who faces her customers' demand. The seller attempts to increase her profit by controlling the buyer's order quantity through a quantity discount strategy. The buyer tries to maximize her profit considering the seller's proposal. We formulate the above problem for deteriorating items as a Stackelberg game between the seller and buyer to analyze the existence of the seller's optimal quantity discount pricing policy which maximizes her total profit per unit of time. The same problem is also formulated as a cooperative game. Numerical examples are presented to illustrate the theoretical underpinnings of the proposed formulation.