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Stocking and quality decisions for deteriorating perishable products under competition

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Journal of the Operational Research Society

Abstract

In this study, we address the joint inventory and quality management in a Cournot duopoly, for a seasonally produced, perishable product whose quality deteriorates over time. The sales of the product occur over two periods, namely the season (first period) and the off-season (second period). Apart from the stocking quantities for the two periods, firms must decide the quality levels of the units to stock for the second selling period. Firms incur a cost to maintain particular quality levels. The equilibrium policies of the firms are characterized, and we discuss the impact of the firms’ quality costs on their inventory and quality decisions. We identify the conditions of the quality costs when competition ceases to exist in the second period, and analyse the impact of the quality costs on inter-temporal price fluctuations and product availability. Using the unconstrained equilibrium policy, we frame the firms’ inventory disposal policies when production yields are exogenous.

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Acknowledgements

The authors are grateful to the anonymous referees, the editor, and the associate editor for their valuable comments. The second author gratefully acknowledges the funding support received from the AIRBUS Group Endowed Chair for Sourcing and Supply Management at the Indian Institute of Management Bangalore for this research.

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Authors and Affiliations

  1. Anderson School of Management, University of California, Los Angeles, California

    Prashant Chintapalli

  2. Indian Institute of Management, Bangalore, India

    Jishnu Hazra

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  1. Prashant Chintapalli
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  2. Jishnu Hazra
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Correspondence to Prashant Chintapalli.

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Supplementary information accompanies this paper on the Journal of the Operational Research Society website (www.palgrave-journals.com/jors)

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Chintapalli, P., Hazra, J. Stocking and quality decisions for deteriorating perishable products under competition. J Oper Res Soc 67, 593–603 (2016). https://doi.org/10.1057/jors.2015.80

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  • DOI: https://doi.org/10.1057/jors.2015.80

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