Unified discount pricing models of a two-echelon channel with a monopolistic manufacturer and heterogeneous retailers

This paper considers a two-echelon channel in which a monopolistic manufacturer supplies a single product to multiple heterogeneous retailers who are in separate markets. The present paper studies the problem of how the manufacturer in a manufacturer-Stackelberg game designs a unified quantity-discount pricing scheme to improve the whole channel’s profit as well as each partner’s profit. Considered in the paper are two types of unified quantity-discount pricing schemes: the regular quantity-discount pricing scheme and the incremental volume discount pricing scheme. Each of the two types of schemes includes a single price-break discount policy and a non-linear quantity discount policy. Optimal solutions are derived and numerical examples presented to illustrate the efficiency of each discount policy.