Optimal pricing and production lot size policies with advertisement and price-dependent demand

C. K. Sivashankari () and Shib Sankar Sana ()
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C. K. Sivashankari: R.M.K. Engineering College
Shib Sankar Sana: Kishore Bharati Bhagini Nivedita College

International Journal of System Assurance Engineering and Management, 2025, vol. 16, issue 6, No 10, 2150-2165

Abstract: Abstract This article deals with optimal pricing and production lot size policies for advertisement and price-sensitive customers’ demand in the imperfect production system, considering reworking and price-break-even point system where an amount comparable to the scrap is kept on hand as a buffer stock to preserve the company's reputation. The advertising and selling price-dependent demand are crucial components of the product when a product is introduced newly to the market. A profit function of the manufacturing firm is formulated to obtain the ideal production lot size and optimal pricing in an imperfect production system to achieve overall maximum profits, considering the effects of defective items, rework, scrap, price break-even point, and buffer stock in the model. Further, the model for the price break-even point (PBEP) and for determining the maximum profit is analyzed. Finally, numerical examples are illustrated to justify the model. Additionally, a sensitivity analysis is carried out in conjunction with the representation's building blocks.

Keywords: Advertisement; Price-dependent demand; Optimal pricing; Production lot size; Price break-even point (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13198-025-02787-4

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