Optimal EOQ for Announced Price Increases in Infinite Horizon

Wei Huang (), Vidyadhar G. Kulkarni () and Jayashankar M. Swaminathan ()
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Wei Huang: Department of Operations Research, University of North Carolina, Chapel Hill, North Carolina 27599-3180
Vidyadhar G. Kulkarni: Department of Operations Research, University of North Carolina, Chapel Hill, North Carolina 27599-3180
Jayashankar M. Swaminathan: Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina 27599-3490

Operations Research, 2003, vol. 51, issue 2, 336-339

Abstract: In this paper we consider an infinite horizon economic order quantity (EOQ) model with single announced price increase, with an option of placing a special order just before the price increase takes effect. We extend earlier work where it is assumed that the special order is an integral multiple of the new EOQ quantity. In the process, we show that when the assumption of integrality is not valid, the earlier approach of minimizing the cost difference over a finite horizon is no longer valid and establish the periodicity of cost difference function. Next, we show that the Cesaro limit of the function exists and utilize that to derive the optimal special-order quantity. We find that the optimal special-ordering policy is of ( s , S ) type.

Keywords: Inventory; lot sizing: economic order quantity (EOQ); Inventory; pricing: special ordering for price increases (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (8)

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