Postponed holdback pricing, profit and consumer surplus

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Operational decisions of a monopolist firm affect expected social welfare, a fact typically ignored by OM models. Specifically, the price selected directly affects the consumer surplus, which has to be added to firm's profit to find the social welfare. We assume an uncertain, price-sensitive, demand. Production capacity is selected at the outset, but the price is chosen after demand uncertainty realized itself. This model was proposed by Van Mieghem and Dada (1999), but we extend it to other demand functions. We then compute the resulting consumer surplus. Finally, we consider such issues in a decentralized supply chain with revenue sharing.

Original languageEnglish
Article number1240007
JournalAsia-Pacific Journal of Operational Research
Issue number1
StatePublished - Feb 2012


  • Pricing
  • consumer surplus
  • lot-sizing


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