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A Note on the Structure of Joint Inventory-Pricing Control with Lead Times.

Research output: Contribution to Journal/MagazineJournal articlepeer-review

  • Zhan Pang
  • Frank (Youhua) Chen
  • Youyi Feng
<mark>Journal publication date</mark>05/2012
<mark>Journal</mark>Operations Research
Issue number3
Number of pages7
Pages (from-to)581-587
Publication StatusPublished
<mark>Original language</mark>English


We consider a joint inventory-pricing control problem for a periodic-review, single-stage inventory system with a positive order leadtime and a linear order cost. Demands in consecutive periods are independent but their distributions depend on the price in accordance with a stochastic demand function of additive form. Pricing and ordering decisions are made simultaneously at the beginning of each period. The objective is to maximize the total expected discounted profit over a finite horizon. We partially characterize the structure of the optimal joint ordering and pricing policies. We also show that our structural analysis can be extended
to a multi-stage (or serial) inventory system with constant or stochastic leadtimes and an assemble-to-order system with price-sensitive demand.