A Stochastic Stock-Linked Pricing Framework for Production–Inventory Optimization: Evidence of Profit Gains over Traditional Models

Prabal Das () and Nabendu Sen ()
Additional contact information
Prabal Das: Assam University, Department of Mathematics
Nabendu Sen: Assam University, Department of Mathematics

SN Operations Research Forum, 2025, vol. 6, issue 4, 1-34

Abstract: Abstract Volatile market conditions and the increasing integration of financial dynamics into supply chains underscore the need for inventory models capable of adapting pricing strategies in real time. This study presents a novel dual-scenario production–inventory framework that, for the first time, directly incorporates stock-based pricing—modeled through geometric Brownian motion (GBM)—into the inventory decision process, enabling a rigorous comparison with the traditional currency-based pricing paradigm. The model traces inventory evolution across production and consumption phases, jointly optimizing the initial stock price and production-to-consumption transition time to maximize total profit. Computational analysis reveals that the stock-based configuration achieves a +8.2% higher maximum profit and a 20.0% shorter optimal transition time relative to the monetary benchmark, yielding both economic and operational advantages. Sensitivity analysis on drift rate, volatility, and demand elasticity confirms the robustness of the stochastic framework, while convex profit surfaces verify the global optimality of the obtained solutions. By embedding market drift and volatility directly within the pricing mechanism, the proposed model establishes a resilient, market-aligned decision-support framework for industries facing financial uncertainty and rapid demand fluctuations.

Keywords: Production-inventory management; Stock-based pricing; Currency-based pricing; Optimization; Geometric Brownian Motion (GBM); Financial market dynamics; C61; G12; D24; L11; M11 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s43069-025-00577-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:snopef:v:6:y:2025:i:4:d:10.1007_s43069-025-00577-z

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/43069

DOI: 10.1007/s43069-025-00577-z

Access Statistics for this article

SN Operations Research Forum is currently edited by Marco Lübbecke

More articles in SN Operations Research Forum from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().