Best pricing and optimal policy for an inventory system under time-and-price-dependent demand and backordering

Luis A. San-José (), Joaquín Sicilia (), Manuel González- De-la-Rosa () and Jaime Febles-Acosta ()
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Luis A. San-José: Universidad de Valladolid
Joaquín Sicilia: Universidad de La Laguna
Manuel González- De-la-Rosa: Universidad de La Laguna
Jaime Febles-Acosta: Universidad de La Laguna

Annals of Operations Research, 2020, vol. 286, issue 1, No 15, 369 pages

Abstract: Abstract In this paper, we study an inventory system for products where demand depends on time and price. Shortages are allowed and are fully backordered. We suppose that the demand rate is the product of a power time pattern and a three-parametric exponential price function. The objective is to determine the economic lot size, the optimal shortage level and the best selling price to maximize the total profit per unit time. We present an efficient procedure to determine the optimal solution of the inventory problem for all possible scenarios. This procedure is illustrated with several numerical examples. A sensitivity analysis of the optimal inventory policy with respect to the parameters of the demand rate function is also given. Finally, the main contributions of this paper are highlighted and future research directions are introduced.

Keywords: Inventory system; Optimal pricing; Profit maximization; Power demand pattern; Backordering (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10479-018-2953-5

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