Journal of the Operational Research Society

, Volume 55, Issue 3, pp 211–218

Profit maximization in a multi-product firm with impatient customers

Case-Oriented Paper

DOI: 10.1057/palgrave.jors.2601674

Cite this article as:
Levin, E., Ma, Y. & Wright, R. J Oper Res Soc (2004) 55: 211. doi:10.1057/palgrave.jors.2601674

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.

Keywords

economics manufacturing multi-product pricing delivery lags inventory 

Copyright information

© Palgrave Macmillan Ltd 2004

Authors and Affiliations

  1. 1.University of StirlingStirlingScotland
  2. 2.Lingnan University, Tuen MunHong Kong
  3. 3.Centre for Economic Policy Research (CEPR)LondonUK
  4. 4.University of BonnBonnGermany