Determination of credit period and production lot size to increase producer’s profit with dependent demand function

This paper deals with the problem of determining optimal credit period and production lot size from the perspective of producer. The authors assume that a retailer jointly determines the unit retail price and order size to mazimize profit when he/she purchases a product for which the producer offers a trade credit. Two widely used demand functions are adopted for the study in which demands are decreasing function of the retail price. Mathematical models for producer-retailer system are developed and a solution procedure is presented which shows how to achieve an optimal length of trade credit and production lot size for producer. The effect of production rate on the behavior of both producer and retailer is also investigated using an example. [In Korean.]