Optimal Inventory Control and Allocation for Sequential Internet Auctions

Shuren Liu (), Yimin Zhu () and Qiying Hu ()
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Shuren Liu: School of Mathematics and Computational Science, Xiangtan University, Xiangtan 411105, P. R. China
Yimin Zhu: Department of Mathematics and Science, Quzhou College, Quzhou 324000, P. R. China
Qiying Hu: School of Management, Fudan University, Shanghai 200433, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2015, vol. 32, issue 02, 1-32

Abstract: We study an optimal inventory control and allocation for a seller who uses sequential Internet auctions to sell replenishment products. This problem is faced not only by retailers/distributors in the retail industry but also by manufacturers who use sequential Internet auctions to sell products that can be replenished. We consider the total expected discounted profit criterion in a finite horizon and both the discounted and average profit criteria over an infinite horizon, and show the optimality of the so-called base-stock-allocate-all (BSAA) policies. Then, we simplify the problem of computing the optimal policies and profits for either the discounted or average profit criterion in an infinite horizon to an optimization problem with only one integer decision variable. We show these results for the list price case, and also for the case where the reserve price is a decision variable. Finally, numerical results are given, where the effects of several model parameters on the optimal policies and profits are numerically analyzed.

Keywords: Internet auction; inventory control; base-stock-allocate-all policy; Markov decision processes (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0217595915500037

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