Channel coordination,trade credit and quantity discounts for freight cost |
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Institution: | 1. Department of Systems and Operations Management, David Nazarian College of Business and Economics, California State University, Northridge, Northridge, CA 91330, USA;2. Faculty of Business, University of New Brunswick, Saint John, New Brunswick, Canada |
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Abstract: | In this paper we consider vendor-buyer channels subject to trade credit and quantity discounts for freight cost. We deal with the problems of determining the vendor’s credit period, the buyer’s retail price and order quantity while still maximizing profits. We focus on how channel coordination can be achieved using trade credit and how trade credit can be affected by quantity discounts for freight cost. We show that profits for both parties increase under channel coordination when the credit period is kept within an appropriate range. This range becomes wider as the discount for freight rates increases. |
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