Optimal Price and Lot Size for an EOQ Model with Full Backordering under Power Price and Time Dependent Demand

Luis A. San-José, Joaquín Sicilia, Manuel González- de-la-Rosa and Jaime Febles-Acosta
Additional contact information
Luis A. San-José: IMUVA-Mathematics Research Institute, University of Valladolid, 47011 Valladolid, Spain
Joaquín Sicilia: Department of Mathematics, Statistics and Operational Research, University of La Laguna, 38200 San Cristóbal de La Laguna, Spain
Manuel González- de-la-Rosa: Department of Business Administration and Economic History, University of La Laguna, 38200 San Cristóbal de La Laguna, Spain
Jaime Febles-Acosta: Department of Business Administration and Economic History, University of La Laguna, 38200 San Cristóbal de La Laguna, Spain

Mathematics, 2021, vol. 9, issue 16, 1-16

Abstract: In this paper, we address an inventory system where the demand rate multiplicatively combines the effects of time and selling price. It is assumed that the demand rate is the product of two power functions, one depending on the selling price and the other on the time elapsed since the last inventory replenishment. Shortages are allowed and fully backlogged. The aim is to obtain the lot sizing, the inventory cycle and the unit selling price that maximize the profit per unit time. To achieve this, two efficient algorithms are proposed to obtain the optimal solution to the inventory problem for all possible parameter values of the system. We solve several numerical examples to illustrate the theoretical results and the solution methodology. We also develop a numerical sensitivity analysis of the optimal inventory policy and the maximum profit with respect to the parameters of the demand function.

Keywords: EOQ inventory model; shortages; lot sizing; optimal pricing; profit maximization (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2227-7390/9/16/1848/pdf (application/pdf)
https://www.mdpi.com/2227-7390/9/16/1848/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:9:y:2021:i:16:p:1848-:d:608776

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().