Optimal pricing and inventory policies: Centralized and decentralized decision making

Optimal pricing and inventory policies: Centralized and decentralized decision making

0.00 Avg rating0 Votes
Article ID: iaor20022881
Country: Netherlands
Volume: 138
Issue: 3
Start Page Number: 578
End Page Number: 600
Publication Date: May 2002
Journal: European Journal of Operational Research
Authors: ,
Keywords: production, inventory
Abstract:

The paper studies an optimal control problem of pricing and inventory replenishment in a system with serial inventories. Consumer demand for a specific product at a retail outlet depends on price as well as the in-store stock of the product. The hypothesis is that for certain consumer products, a large volume of displayed goods leads consumers to buy more than if the stock is small. In addition to the stock that is on display in the store, there is an inventory of the product in a central warehouse. First we consider a setup in which management of the two stocks is decentralized such that pricing decisions are made by the store manager who also decides on the level of in-store inventory. The warehouse manager makes the replenishment decisions concerning the stock in the warehouse. Next we study the problem where stock management and pricing decisions are centralized. Optimal trajectories for inventories, replenishment rates, and retail price are derived by using phase diagrams and a formal synthesizing procedure.

Reviews

Required fields are marked *. Your email address will not be published.