Optimal pricing and advertisement with allowable shortages for non-instantaneous deteriorating items under inflation and trade credit

Chirag R. Trivedi, Mrudul Y. Jani, D.C. Joshi and Manish R. Betheja

International Journal of Procurement Management, 2024, vol. 19, issue 1, 122-158

Abstract: In recent business transactions, the policy of trade credit is usually used to improve product demand and maximise revenue by earning interest. Furthermore, advertisement is a tool that assists the retailer in attracting more consumers. Moreover, demand for products varies depending on the price and while managing inventory most important thing is product deterioration. The current time value of price is calculated at constant inflation rate. The following points are considered: 1) trade credit policy between supplier and retailer; 2) the product demand depends on sales price and advertisement; 3) the product deterioration is non-instantaneous; 4) the current time value of money is calculated at constant inflation rate, and shortages are allowed. The main aim to find the optimality of total profit function with respect to cycle time inventory vanish time, sales price, and frequency of advertisement. A sensitivity analysis of significant parameters and some important managerial implications are analysed.

Keywords: advertisement; inflation; non-instantaneous deterioration; pricing; shortages; trade credit policy. (search for similar items in EconPapers)
Date: 2024
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