Premium
Economic Order Quantities, Volume Discounts, and Wealth Maximization
Author(s) -
Followill Richard A.,
Schellenger Michael,
Marchand Patrick H.
Publication year - 1990
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1990.tb01293.x
Subject(s) - maximization , order (exchange) , volume (thermodynamics) , economics , economic order quantity , microeconomics , utility maximization , business , mathematical economics , marketing , finance , supply chain , thermodynamics , physics
This study challenges the generally accepted managerial decision to accept a quantity discount if total, perperiod inventory and acquisition costs are reduced. In this paper, the economic order quantity model is reformulated within an explicit wealth maximization framework, and the reformulated model is then utilized to analyze inventory decisions when volume discounts are available. The results of the study indicate that the traditional method of analyszing volume discount opportunities may invoke wealth decreasing decisions.