Optimal Capacity Expansion Policy with a Deductible Reservation Contract
Jianbin Li, Minghui Xu, Ruina Yang
DOI: 10.4236/jssm.2011.41005   PDF    HTML     6,346 Downloads   10,270 Views   Citations


This paper investigates an optimal capacity expansion policy for innovative product in a context of one supplier and one retailer. With a fully deductible contract, we employ the Stackelberg game model to examine the negotiation process of capacity expansion in a single period. We first derive the retailer's optimal reservation strategy and then characterize the optimal capacity expansion policy for the supplier. We also investigate the impacts of reservation price on the optimal strategy of capacity reservation and expansion as well as the supplier’s expected profits.

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Li, J. , Xu, M. and Yang, R. (2011) Optimal Capacity Expansion Policy with a Deductible Reservation Contract. Journal of Service Science and Management, 4, 27-34. doi: 10.4236/jssm.2011.41005.

Conflicts of Interest

The authors declare no conflicts of interest.


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