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Technical Note—Price and Production Decisions with Random Demand

L. Joseph Thomas
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L. Joseph Thomas: Cornell University, Ithaca, New York

Operations Research, 1974, vol. 22, issue 3, 513-518

Abstract: This note studies the problem of setting price and production levels simultaneously in a series of N periods, where price is a parameter in the probability distribution of demand. It develops a simple policy characterized by two stock levels and an optimal price line in the price-inventory plane, gives an algorithm to compute such a policy and check conditions for its optimality, and presents a counterexample to the simple policy, using a small set of allowable prices, along with a discussion of both the counterexample and some characteristics of the model.

Date: 1974
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