Coordinated pricing and inventory decisions for perishable products

Kaya O., Polat A. L.

OR SPECTRUM, vol.39, no.2, pp.589-606, 2017 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 39 Issue: 2
  • Publication Date: 2017
  • Doi Number: 10.1007/s00291-016-0467-6
  • Journal Name: OR SPECTRUM
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.589-606
  • Keywords: Pricing, Inventory, Perishable, Revenue management, TIME-VARYING DEMAND, DETERIORATING INVENTORY, POLICY, MODEL, SHORTAGES, RESELLER
  • Anadolu University Affiliated: Yes

Abstract

We investigate the problem of jointly determining the optimal pricing and inventory replenishment strategy for a deterministic perishable inventory system in which demand is time and price dependent. The inventory is also assumed to decay at a certain rate. The seller has the opportunity to adjust prices for a discrete number of times at a certain cost during the sales season to influence demand and to improve revenues. We develop a mathematical model to find the optimal times to change the prices, the optimal prices and the optimal order quantity. We present analytical results to find the optimal prices when the times of price changes are given and design heuristic algorithms to determine the optimal times to change the prices. We analyze the efficiency of multiple pricing strategy by comparing the profits obtained by single pricing case and also analyze the effect of different parameters on the optimal solution through numerical experiments.