Optimal pricing and replenishment schedule for deteriorating items over a finite planning horizon

Liang-Tu Chen and Jen-Ming Chen

International Journal of Revenue Management, 2008, vol. 2, issue 3, 215-233

Abstract: This paper considers a monopolistic retailer who stocks a single product that is subject to continuous decay, faces a price-dependent and time-varying demand, and has the objective of determining replenishment schedule and selling price to maximise the total profit stream over multi-period planning horizon. We propose both coordinated and decentralised decision-making policies that drive the solution of the model. The numerical result shows that the solution generated by the coordinated policy outperforms that by the decentralised policy in maximising profit and many other quantifiable measures such as minimising inventory investment and storage capacity.

Keywords: inventory; optimal pricing; replenishment schedules; dynamic programming; inter-functional coordination; deterioration; monopolistic retailers; finite planning horizon; decentralised decision making; coordinated decision making; profit maximisation; inventory investment; storage capacity. (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijrevm:v:2:y:2008:i:3:p:215-233

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