Pricing and determining the optimal discount time   of perishable goods with time and price dependent demand

Pricing and determining the optimal discount time of perishable goods with time and price dependent demand

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Article ID: iaor20173831
Volume: 51
Issue: 2
Start Page Number: 509
End Page Number: 518
Publication Date: Apr 2017
Journal: RAIRO - Operations Research
Authors: ,
Keywords: combinatorial optimization, demand, heuristics, behaviour
Abstract:

In the eyes of consumers, the value of perishable goods generally declines during the good’s lifetime. In this situation a mechanism to encourage purchases, such as discounts or reduction in price policy can be effective. In this paper, we determine the discount time and the prices for a perishable product with a one period lifetime. Product demand is dependent on price and time. Demand function is different after discount time to an increase in costumer. After modeling, we show that the profit function is concave and optimal price and the discount time is unique. Due to the complexity of the model, using a heuristic algorithm, the near optimal price and the near optimal discount time are calculated.

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