Coordinated pricing and inventory control problems with capacity constraints and fixed ordering cost |
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| Authors: | Ju‐Liang Zhang Jian Chen Chung‐Yee Lee |
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| Affiliation: | 1. Department of Logistics Management, School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China;2. Department of Management Science and Engineering, School of Economics and Management, Tsinghua University, Beijing 100084, China;3. Department of Industrial Engineering and Logistics Management, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong |
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| 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 |
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| Keywords: | stochastic inventory management pricing finite horizon capacity fixed ordering cost |
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