Optimal pricing for an advance sales system with price and waiting time dependent demands

Optimal pricing for an advance sales system with price and waiting time dependent demands

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Article ID: iaor20082136
Country: Japan
Volume: 50
Issue: 2
Start Page Number: 151
End Page Number: 161
Publication Date: Jun 2007
Journal: Journal of the Operations Research Society of Japan
Authors:
Keywords: inventory, inventory: order policies
Abstract:

This paper investigates an advance sales system wherein a firm sells an inventory over a limited planning time interval. The firm divides the planning time interval into several reservation periods and delivers the reserved orders at the end of each reservation period. The demands are considered as price and waiting time dependent. In addition, the situation in which customers may cancel their orders before receiving them is also considered. Two continuous time models are developed and analyzed. The ratio of refund to sales price is assumed to be fixed in the first model while it is assumed to be time-dependent in the second model. Solution procedures are developed for both models in order to determine the number of reservation periods, the optimal sales price, and order size.

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