Retailers (companies) can leverage their collective buying power to negotiate lower prices through group buying. This study examines a group buying case study involving two retailers that are facing price sensitivity in the market in conjunction with quantity discount pricing from two suppliers who have limited capacities. To solve the problem, a non-linear optimization method based on Lagrangian multipliers is developed. Numerical examples are provided in order to test the validity of the proposed solution approach and gain insight into how the input parameters influence the solution.
Optimal Decisions for a Group Buying Problem with Two Retailers and two Capacitated Suppliers
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