What is it about?
We optimize the worst case profit for a retailer given only the first and second moments of demand and price of the product. The optimal share of this profit between the retailer and supplier is then considered under a Stackelberg game framework.
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Why is it important?
This is the first time a closed form expression for the optimal quantity of product to order by the retailer from the supplier in the worst case given only the first and second moments of demand and price of the product, with demand being nonnegative, is obtained.
Perspectives
I derive the closed form expression for the optimal quantity of product to order by the retailer from the supplier in the worst case, and also work on other technical details in the paper. The derivations to obtain the expression are quite involved, and there may be simpler ways to obtain the result by interested readers. The difficulty in the derivations lies with the requirement for demand to be nonnegative. This requirement is indeed a realistic assumption, but it makes the analysis more difficult.
Dr Chee Khian Sim
University of Portsmouth
Read the Original
This page is a summary of: Profit Sharing Agreements in Decentralized Supply Chains: A Distributionally Robust Approach, Operations Research, April 2018, INFORMS,
DOI: 10.1287/opre.2017.1677.
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