Optimal pricing and replenishment policy for non-instantaneous deteriorating items with varying rate of demand and partial backlogging

Hardik N. Soni () and Dipali N. Suthar
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Hardik N. Soni: Chimanbhai Patel Post Graduate Institute of Computer Applications
Dipali N. Suthar: Kalol Institute of Technology and Research Centre

OPSEARCH, 2020, vol. 57, issue 3, No 13, 986-1021

Abstract: Abstract This paper proposes an inventory model for non-instantaneous deteriorating items with varying rate of demand and partial backlogging. The demand rate function has negative and positive exponential effect of price and promotional effort, respectively, when the product has no deterioration. Afterwards, the demand rate function assumes multiplicative exponential form of price-promotion and time wherein price-promotion and time each have exponential effect on demand rate. Under these settings, the criterion for optimal replenishment schedule, for any given selling price, is developed and deduced that optimal replenishment policy not only exist but also is unique. Next, it is shown that the total profit per unit time is concave function of price when optimal replenishment schedule is supplied. Numerical example is presented to demonstrate the applicability of the model accompanied by the sensitivity analysis. Results of numerical example indicates that granting promotional effort not only induces more demand but plays significant role to improve the profit.

Keywords: EOQ; Pricing; Non-instantaneous deterioration; Partial backlogging; Promotional effort (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s12597-020-00451-y

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