Optimal Pricing Policies with an Allowable Discount for Perishable Items under Time-Dependent Sales Price and Trade Credit

Mrudul Y. Jani, Manish R. Betheja, Amrita Bhadoriya, Urmila Chaudhari, Mohamed Abbas and Malak S. Alqahtani
Additional contact information
Mrudul Y. Jani: Department of Applied Sciences, Faculty of Engineering and Technology, Parul University, Vadodara 391760, India
Manish R. Betheja: Department of Applied Sciences, Faculty of Engineering and Technology, Parul University, Vadodara 391760, India
Amrita Bhadoriya: Department of Applied Mathematics, ASET, Amity University, Gwalior 474011, India
Urmila Chaudhari: Government Polytechnic Dahod, Dahod 389151, India
Mohamed Abbas: Electrical Engineering Department, College of Engineering, King Khalid University, Abha 61421, Saudi Arabia
Malak S. Alqahtani: Computer Engineering Department, College of Computer Science, King Khalid University, Abha 61421, Saudi Arabia

Mathematics, 2022, vol. 10, issue 11, 1-19

Abstract: Trade credit is generally used by businesses to obtain external funds. This article demonstrates an inventory system from the retailer’s point of view in which (1) the influence of trade credit on expanding small businesses and their consumers is the focus of this research, and (2) the retailer’s on-hand inventory follows the non-instantaneous deterioration. (3) To maximize profit, the demand is disclosed, which is based on not just the sales price, but also on cumulative demand, which indicates saturation and diffusion. (4) The product’s initial price and the permitted discount rate at the time of deterioration are considered to be time-dependent functions of the sales price. In the absence of deterioration, the item is sold at a constant rate, and whenever deterioration occurs, the sales price is assumed to be an exponential function of the discount variable. The main aim is to optimize the total profit of the retailer in terms of cycle time and sales price. The traditional algorithm of optimization is used to address the optimization problem. Finally, the theoretical results are validated by solving three numerical illustrations and conducting a sensitivity analysis of the main factors resulting from the following managerial implications: (1) credit period provides the maximum profit margin of any financing method, and (2) an increase in the initial rate of demand raises sales price while increasing overall profit significantly.

Keywords: discount; dynamic rate of demand; non-instantaneous deterioration; time-varying sales price; trade credit; time-dependent holding cost (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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