Technical Note---A Note on the Structure of Joint Inventory-Pricing Control with Leadtimes

Zhan Pang (), Frank Y. Chen () and Youyi Feng ()
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Zhan Pang: Department of Management Science, Lancaster University, Lancaster LA1 4YX, United Kingdom
Frank Y. Chen: Department of Management Science, City University of Hong Kong, Hong Kong
Youyi Feng: MIT-Zaragoza International Logistics Program, Zaragoza Logistics Center, Zaragoza 50197, Spain

Operations Research, 2012, vol. 60, issue 3, 581-587

Abstract: We consider a joint inventory-pricing control problem for a periodic-review, single-stage inventory system with a positive order leadtime and a linear order cost. Demands in consecutive periods are independent, but their distributions depend on the price in accordance with a stochastic demand function of additive form. Pricing and ordering decisions are made simultaneously at the beginning of each period. The objective is to maximize the total expected discounted profit over a finite horizon. We partially characterize the structure of the optimal joint ordering and pricing policies. We also show that our structural analysis can be extended to a multistage (or serial) inventory system with constant or stochastic leadtimes and an assemble-to-order system with price-sensitive demand.

Keywords: inventory control; dynamic pricing; lead times; L(sharp)-concavity. (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (25)

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