A Polynomial Time Algorithm for a Deterministic Joint Pricing and Inventory Model

Wilco van den Heuvel and Albert Wagelmans

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: In this paper we consider the uncapacitated economic lot-size model, where demand is a deterministic function of price. In the model a single price need to be set for all periods. The objective is to find an optimal price and ordering decisions simultaneously. In 1973 Kunreuther and Schrage proposed an heuristic algorithm to solve this problem. The contribution of our paper is twofold. First, we derive an exact algorithm to determine the optimal price and lot-sizing decisions. Moreover, we show that our algorithm boils down to solving a number of lot-sizing problems that is quadratic in the number of periods, i.e., the problem can be solved in polynomial time.

Keywords: inventory; lot-sizing; pricing; production (search for similar items in EconPapers)
JEL-codes: L11 M M11 R4 (search for similar items in EconPapers)
Date: 2003-09-25
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: A polynomial time algorithm for a deterministic joint pricing and inventory model (2006)
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