This paper studies the optimal compensation policy faced by a monopolistic supplier of commodity. Each customer selects his optimal purchase based on maximizing his surplus. We assume that total demand is increased in proportion to supplier's maximum ...
This paper studies the optimal compensation policy faced by a monopolistic supplier of commodity. Each customer selects his optimal purchase based on maximizing his surplus. We assume that total demand is increased in proportion to supplier's maximum compensation price. There is a trade - off for the supplier between the benefit and the cost of compensation policy. Economic implications are obtained from the optimality conditions such as pricing schedule which depends on the customer type and the quality of product that the customer want to be compensated for. Conditions under which marketing channel improvement can be possible are derived.