A joint model of optimal pricing, ordering, and free gift card

Retailers use various marketing tools, such as gift cards, to increase profits. When retailers offer gift card “free” to consumers who spend above specified thresholds in a single store visit, some consumers may buy more. In this paper, we develop a model that the pricing, ordering and gift card policies of a profit-maximizing retailer, faced with a stochastic consumer demand. We examine how the gift card promotion effect enterprises' operation polices. Through various analyses and a numerical example, we illustrate the main managerial insights of the model which enhances our understanding of the ways retailer can mesh their joint policies with gift card.