Optimal times of price reductions for an inventory model with partial backorder and vertical shift demand

Optimal times of price reductions for an inventory model with partial backorder and vertical shift demand

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Article ID: iaor20073202
Country: France
Volume: 41
Issue: 1
Start Page Number: 35
End Page Number: 47
Publication Date: Jan 2007
Journal: RAIRO Operations Research
Authors:
Keywords: discounts
Abstract:

This paper investigates an inventory control problem where a firm orders and sells an inventory item through discount strategy in a price sensitive market. From the economic points of view, customers may expect a further price reduction when a firm uses pricing promotion to stimulate demand, the demand curve may vertically shift down when a firm reduces the selling price. Taking these phenomena into account, this paper developed a continuous inventory model for finding the ordering quantity, the number of pricing changing and times of price changes simultaneously so as to maximize the total profit. A solution procedure is developed for finding the optimal decision rules.

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