Alalysis Of Free Gift Card Based On Descending Reservation Price In Supply Chain

With the increasingly fierce m arket competition, retailers use a variety of promotions to boost sales and profits, am ong them, gift card is widely used by m any enterprises nowadays for products prom otion. Whether in traditional channels or new Internet channel, gift card has wide applications. But there are just several papers which focus on gift card, and these papers can’t give the enterprises enough theoretical support for the actual practice. Therefore, it is necessary for us to carry out more in-depth study of gift card.In this paper, we use c onsumers’ descending reservation pric e to describe and characterize the behavior of consumers’ purchasing decisions. Based on it, we analyze how the gift card prom otion influences consumers’ purchase decisions. First of all, we discuss gift card strategy under centralized decision-making environment, divided into exogenous retail price, the retail price is fixed at no coupon redem ption promotion of the retail price, the retail price and coupon redemption pr omotion joint decision three cases. Based on the analysis of consum er decision-making behavior, retailer’s profit function is given. By solving the optimization, we get the retailer’s optimal promotional policy in each case, that is th e optimal gift card threshold and gift card value, and then we can get the optimal consumer demand and retailer profits. Next is comparative static analysis, we explores the influence of so me parameters on the optim al strategy and optimal profits, such as the retailers’ average profit m argin, consumers future cash compensation, and consumer’s gift card re demption rate. Study found that consum er’s redemption probability and the retailers’ profit margin are key factors for retailer profits. Also we confirm our conclusions from model calculation by numerical examples. Then we discuss gift card prom otional strategy under decentrali zed decision-making environment, the paper studies retailer-sponsored gift card, which divided into the variable wholesale price and the fixed wholes ale price two cases. In each case, we get the retailer’s optimal promotional policy, followed by a com parative static analysis or numerical example, the study found, only to sa tisfy certain conditions, gift card is profitable.