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Dynamic joint pricing and production policy for perishable products
Author(s) -
Feng Lin,
Zhang Jianxiong,
Tang Wansheng
Publication year - 2018
Publication title -
international transactions in operational research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.032
H-Index - 52
eISSN - 1475-3995
pISSN - 0969-6016
DOI - 10.1111/itor.12239
Subject(s) - pontryagin's minimum principle , dynamic pricing , mathematical optimization , profit (economics) , optimal control , production (economics) , computer science , economic shortage , maximum principle , joint (building) , dynamic programming , function (biology) , operations research , economics , microeconomics , mathematics , architectural engineering , linguistics , philosophy , evolutionary biology , government (linguistics) , engineering , biology
A joint dynamic pricing and production problem for perishable products without shortages is considered. The demand rate is price‐dependent and time‐varying. This paper constructs an optimal control model to maximize the total profit under a general nonlinear production cost function. The feature of the optimal joint dynamic pricing and production policy is analyzed by solving the corresponding optimal control problem on the basis of improved Pontryagin's maximum principle. Then, an effective algorithm is designed to obtain the optimal joint policy. The case of the joint static optimal policy is also investigated and compared with the dynamic one. Finally, numerical examples are presented to illustrate the effectiveness of the proposed methods, and some managerial implications are provided for the management of perishable items.