TY - JOUR

T1 - A Note on the Structure of Joint Inventory-Pricing Control with Lead Times.

AU - Pang, Zhan

AU - Chen, Frank (Youhua)

AU - Feng, Youyi

PY - 2012/5

Y1 - 2012/5

N2 - 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 extendedto a multi-stage (or serial) inventory system with constant or stochastic leadtimes and an assemble-to-order system with price-sensitive demand.

AB - 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 extendedto a multi-stage (or serial) inventory system with constant or stochastic leadtimes and an assemble-to-order system with price-sensitive demand.

KW - Pricing

KW - Inventory Management

KW - Stochastic Dynamic Programming

U2 - 10.1287/opre.1120.1052

DO - 10.1287/opre.1120.1052

M3 - Journal article

VL - 60

SP - 581

EP - 587

JO - Operations Research

JF - Operations Research

SN - 0030-364X

IS - 3

ER -