Note—On “A Quantity Discount Pricing Model to Increase Vendor Profits”

Abstract

Monahan (Monahan, James P. 1984. A quantity discount pricing model to increase vendor profits. Management Sci. 30 (June) 720–726.) develops a model for establishing an optimal quantity discount schedule from a vendor's viewpoint. In this note we show that this model is limited to the case where the vendor buys from another supplier. Incorporating vendor's inventory carrying costs, we develop a generalized version of Monahan's model and demonstrate its equivalence with the joint economic lot size approach suggested by Banerjee (Banerjee, Avijit. 1986. A joint economic lot size model for purchaser and vendor. Decision Sci. 17 (Summer) 292–311.).