Business Intelligence

Advance Booking Programs for Managing Supply, Demand, And Price Risks

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Executive Summary

While advance booking programs have been shown to be effective for firms to manage uncertain demand, the effectiveness of such programs is unclear when supply, demand, and price risks are present in a supply chain. Motivated by an advance booking program for managing these three types of risks in a flu vaccine supply chain, author presents a two-stage Stackelberg game model to examine the dynamic interactions between a manufacturer and a retailer over two stages. It's found that supply uncertainty and demand uncertainty affect the firms' profits in an opposite manner under the advance booking program: the firms' expected profits tend to decrease in supply uncertainty, but they tend to increase in demand uncertainty.

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