The second purchase decision under selling price-sensitive stochastic demand and purchasing price uncertainty

Xiangling Hu and Jaideep Motwani

International Journal of Operational Research, 2021, vol. 40, issue 4, 489-501

Abstract: It is quite common for a retailer to stock a specific quantity of a product more than once during a certain time period and then sell the product to the customers during the selling season. The retailer also has the option to make a second purchase, as long as there is a potential profit increase on account of the purchase. Due to the stochastic spot market purchasing price and the selling price dependent random demand, the retailer needs to determine whether a second purchase is necessary and if so what are the corresponding order time, quantity, and selling price in order to maximise the expected profit. In this paper, we develop a reality-adaptable solution algorithm to simplify the solution procedure. We also run simulations to analyse the inventory decisions, and to compute the profits when a second purchase is possible.

Keywords: purchasing; pricing; price uncertainties; price-sensitive stochastic demand. (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijores:v:40:y:2021:i:4:p:489-501

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