Product donation and inventory strategies considering ex ante commitment and prosocial consumers
摘要
Product donations are a common practice among businesses as a means of fulfilling their social responsibilities and achieving sustainable development goals. This paper investigates a decision problem regarding product donation and production with ex ante commitment. Demand stochastically increases with the quantity of donations in the presence of prosocial consumers in the market. Under two scenarios—namely, a linear demand increment function and a strictly concave demand increment function—we derive the optimal strategies for product donation and production quantities, respectively. Two motivations for donating products are identified: inventory reduction and market promotion. Specifically, even if donation activity does not stimulate market demand, firms may still commit to donating, driven by the need to reduce inventory for products with high profit margins and significant inventory costs. In addition, we discover that under the strictly concave demand increment function scenario, firms may engage in speculative behavior by donating inferior products produced from additional production at a lower cost, a phenomenon that does not occur under the linear demand increment function scenario. Furthermore, we compare the product donation model with a transactional cash donation model. We show that the advantage of product donations is more prominent in cases where products have high inventory costs, elevated selling prices, low regular production costs, and consumers exhibit a high level of prosociality.