Joint price and lot size determination under conditions of permissible delay in payments and quantity discounts for freight cost

Joint price and lot size determination under conditions of permissible delay in payments and quantity discounts for freight cost

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Article ID: iaor199956
Country: Netherlands
Volume: 91
Issue: 3
Start Page Number: 528
End Page Number: 542
Publication Date: Jun 1996
Journal: European Journal of Operational Research
Authors: , ,
Keywords: lot sizing, discounts
Abstract:

This paper deals with the problem of determining the retailer's optimal price and lot size simultaneously under conditions of permissible delay in payments. It is assumed that the ordering cost consists of a fixed set-up cost and a freight cost, where the freight cost has a quantity discount offered due to the economies of scale. The constant price elasticity demand function is adopted, which is a decreasing function of retail price. Investigation of the properties of an optimal solution allows us to develop an algorithm whose validity is illustrated through an example problem.

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