Retailer's optimal pricing and lot-sizing policies for deteriorating items with partial backlogging

Retailer's optimal pricing and lot-sizing policies for deteriorating items with partial backlogging

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Article ID: iaor20063068
Country: Netherlands
Volume: 168
Issue: 1
Start Page Number: 51
End Page Number: 64
Publication Date: Jan 2006
Journal: European Journal of Operational Research
Authors: , , ,
Keywords: optimization
Abstract:

Pricing is a major strategy for a retailer to obtain its maximum profit. Therefore, in this paper, we establish an economic order quantity model for a retailer to determine its optimal selling price, replenishment number and replenishment schedule with partial backlogging. We first prove that the optimal replenishment schedule not only exists but also is unique, for any given selling price. Next, we show that the total profit is a concave function of p when the replenishment number and schedule are given. We then provide a simple algorithm to find the optimal selling price, replenishment number and replenishment timing for the proposed model. Finally, we use a couple of numerical examples to illustrate the algorithm.

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