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Chinese Journal of Management Science ›› 2019, Vol. 27 ›› Issue (12): 100-112.doi: 10.16381/j.cnki.issn1003-207x.2019.12.010

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The Pricing Model of Emergency Supplies under Quantity Flexible Contracts with Dual Purchasing Sources

HU Zhong-quan, TIAN Jun, FENG Geng-zhong   

  1. School of Management, Xi'an Jiaotong University, Xi'an 710049, China
  • Received:2018-04-03 Revised:2018-08-10 Online:2019-12-20 Published:2019-12-30

Abstract: In order to respond quickly to sudden disasters, governments should reserve amounts of emergency supplies in advance. However, due to the limitation of funds and the explosive growth of demand for supplies after disasters,the pre-stored supplies is often difficult to meet the actual demand,which brings tremendous pressure to governments' rescue work.In recent years, practice has shown that strengthening cooperation between governments and enterprises,which means that governmentsrely on enterprises to store emergency supplies,is an effective way to improve the level of emergency supplies and ensure supply capacity.
To establish the cooperative relationship of joint reserve of emergency supplies between governments and enterprises, a government-driving pricing model of emergency supplies under quantity flexible contracts with dual purchasing sources is designed. Considering a spot market,in addition to conventional procurement, a government provides a quantity flexible contract to a supplier, which can establish a cooperative relationship between them. Through quantitative deduction, the optimal decision-making is derivers for both the government and the enterprise in different situations. Meanwhile, further the impact of factors on the optimal decisions of the government and the enterprise and their cost and profit is analyzed, which can provideguidance for the government and enterpriseto establish the cooperative relationship of joint reserve of emergency supplies.Some important conclusions and management implications are summarized as follows.
(a)The conditions that the supplier participates in the joint reserve of emergency supplies with the government is given.Specifically, when the government has a high probability or high price of flexible procurement,the supplier agrees to establish the cooperative relationship. The probability of flexible procurement is affected by the probability of sudden disasters and the quantity of government's own reserves.
(b) What's more, the government's optimal pricing strategy with minimizing his expected cost is giver and it is found that the optimal strategy is mainly affected by thespot marketpriceand the probability of flexible procurement. More concretely, with the spot market price increases and the probability of flexible procurement decreases, the optimal pricing will increase.
(c)Finally, the impact of the probability of sudden disasters, the quantity of government's own reserves and the spot market price on the expected cost of government and the expected profit of supplier are analyzed. In addition, it is also derived that with the probability of sudden disasters and the spot market price increase, the expected cost of government and the expected profit of supplier will all increase. However, the impact of the quantity of the government's own reserves is complicated. Only reasonable quantity of the government's own reserves can encourage the supplier to actively participate in the joint reserve to reduce the government's cost.

Key words: emergency supplies purchasing, emergency supplies reserve, quantity flexible contract, dual purchasing sources, pricing game

CLC Number: