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Profit maximization in a multi-product firm with impatient customers

Levin, E.J. and Mae, Y. and Wright, R.E. (2004) Profit maximization in a multi-product firm with impatient customers. Journal of the Operational Research Society, 55 (3). pp. 211-219. ISSN 0160-5682

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Abstract

In this paper, the standard model of profit maximization is extended to include multi-product production in a market characterized by impatient customers. A formal model is presented that includes price, delivery frequency, production run length per set-up and product range as endogenous variables. The model facilitates the analysis of the complex interactions between these variables and highlights the inherent problems relating to profit maximization. For example, offering a broader range of products and/or more rapid delivery may seem to be a sensible response for a multi-product firm with impatient customers in a scenario of depressed demand. However, the analysis shows that such strategies could be counterproductive.