Order quantities with temporary price reductions

Order quantities with temporary price reductions

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Article ID: iaor1989430
Country: United Kingdom
Volume: 40
Issue: 10
Start Page Number: 937
End Page Number: 940
Publication Date: Oct 1989
Journal: Journal of the Operational Research Society
Authors: ,
Abstract:

The temporary price-change problem is studied, in which the objective is to minimize discounted cash flows. As pointed out by Goyal, in an earlier paper, only the cash transactions at purchase times (i.e. the payments for the goods and the ordering costs) were considered. The cash flows associated with ‘inventory maintenance’ costs which occur more or less continuously over time were neglected, which changes the structure of the model. Examples of these costs include storage, insurance, record-keeping, deterioration and obsolescence costs. In this paper, these continuously generated cash flows are included in the analysis, thereby making the new model more applicable to practical situations. This model is of interest because order-quantity decisions often must be made under conditions of both temporary price reductions and/or imminent price increases. These changes occur frequently in practice.

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