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Inventory control and pricing for perishable products under age and price dependent stochastic demand

Onur Kaya () and Sajjad Rahimi Ghahroodi ()
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Onur Kaya: Anadolu University
Sajjad Rahimi Ghahroodi: Koç University

Mathematical Methods of Operations Research, 2018, vol. 88, issue 1, 1-35

Abstract: Abstract Perishable products have a short lifetime and cause a high amount of wastage when managed ineffectively, due to their deterioration over time. We consider coordinated inventory and pricing decisions for perishable products in a periodically-reviewed inventory system with an age and price dependent random demand. We consider the products with a fixed shelf lifetime and use dynamic programming to model this system. We prove certain structural characteristics of the optimal solution and also analyze the effect of different parameters on the optimal solution through numerical experiments. In addition, we analyze simple-to-implement inventory control policies, namely quantity-based and age-based policies, and investigate their effectiveness.

Keywords: Perishable inventory; Pricing; Dynamic programming; Periodic review; Age-dependent demand (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:spr:mathme:v:88:y:2018:i:1:d:10.1007_s00186-017-0626-9