Costly price changes with dynamic pricing and lot-sizing

Costly price changes with dynamic pricing and lot-sizing

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Article ID: iaor201525649
Volume: 13
Issue: 4
Start Page Number: 322
End Page Number: 333
Publication Date: Aug 2014
Journal: Journal of Revenue and Pricing Management
Authors:
Keywords: combinatorial optimization
Abstract:

In this article, we address the profit maximization version of the dynamic economical problem where we charge a cost per price change. This model makes an explicit link between the number of price changes and the cost of changing prices. Hence, this new cost can determine the number of different possible prices, especially when all others costs are constant, as well as it reflects the real cost of changing prices (labor, communication and so on). To solve our model, we describe a simple heuristic that strongly outperforms state‐of‐art solvers even for medium‐size instances. Furthermore, we give numerical evidence that charging a cost per price change does not impact setups in general, even if it deeply modifies the pricing.

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