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Coordinated pricing and inventory control problems with capacity constraints and fixed ordering cost
Author(s) -
Zhang JuLiang,
Chen Jian,
Lee ChungYee
Publication year - 2012
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/nav.21495
Subject(s) - economic shortage , profit (economics) , inventory control , time horizon , economics , mathematical optimization , holding cost , operations research , microeconomics , computer science , mathematics , operations management , linguistics , philosophy , government (linguistics)
This article addresses a single‐item, finite‐horizon, periodic‐review coordinated decision model on pricing and inventory control with capacity constraints and fixed ordering cost. Demands in different periods are random and independent of each other, and their distributions depend on the price in the current period. Each period's stochastic demand function is the additive demand model. Pricing and ordering decisions are made at the beginning of each period, and all shortages are backlogged. The objective is to find an optimal policy that maximizes the total expected discounted profit. We show that the profit‐to‐go function is strongly CK‐concave, and the optimal policy has an ( s , S , P ) ‐like structure. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 2012