Optimal Pricing and Production Policies of a Make-to-Stock System with Fluctuating Demand

Jean-Philippe Gayon (), Isilay Talay-Degirmenci, F. Karaesmen and L. Örmeci
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Jean-Philippe Gayon: G-SCOP_GCSP - Gestion et Conduite des Systèmes de Production - G-SCOP - Laboratoire des sciences pour la conception, l'optimisation et la production - UJF - Université Joseph Fourier - Grenoble 1 - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INPG - Institut National Polytechnique de Grenoble - CNRS - Centre National de la Recherche Scientifique
Isilay Talay-Degirmenci: Duke University [Durham]
F. Karaesmen: Koç University
L. Örmeci: Koç University

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Abstract: We study the effects of different pricing strategies available to a production–inventory system with capacitated supply, which operates in a fluctuating demand environment. The demand depends on the environment and on the offered price. For such systems, three plausible pricing strategies are investigated: static pricing, for which only one price is used at all times, environment-dependent pricing, for which price changes with the environment, and dynamic pricing, for which price depends on both the current environment and the stock level. The objective is to find an optimal replenishment and pricing policy under each of these strategies. This article presents some structural properties of optimal replenishment policies and a numerical study that compares the performances of these three pricing strategies.

Date: 2009
Note: View the original document on HAL open archive server: https://hal.science/hal-00363686v1
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Published in Probability in the Engineering and Informational Sciences, 2009, 23 (2), pp.205-230. ⟨10.1017/S026996480900014X⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00363686

DOI: 10.1017/S026996480900014X

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