Coordinated pricing and inventory control problems with capacity constraints and fixed ordering cost

Ju‐Liang Zhang, Jian Chen and Chung‐Yee Lee

Naval Research Logistics (NRL), 2012, vol. 59, issue 5, 376-383

Abstract: This article addresses a single‐item, finite‐horizon, periodic‐review coordinated decision model on pricing and inventory control with capacity constraints and fixed ordering cost. Demands in different periods are random and independent of each other, and their distributions depend on the price in the current period. Each period's stochastic demand function is the additive demand model. Pricing and ordering decisions are made at the beginning of each period, and all shortages are backlogged. The objective is to find an optimal policy that maximizes the total expected discounted profit. We show that the profit‐to‐go function is strongly CK‐concave, and the optimal policy has an (s,S,P) ‐like structure. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 2012

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:wly:navres:v:59:y:2012:i:5:p:376-383

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