Inventory policy for products with price and time-dependent demands

Abstract

This paper investigates the problem of jointly determining the order size and optimal prices for a perishable inventory system under the condition that demand is time and price dependent. It is assumed that a decision-maker has the opportunity to adjust prices before the end of the sales season to influence demand and to improve revenues. A mathematical model is developed to find the optimal number of prices, the optimal prices and the order quantity. Analytical results show that a stationary solution to the Kuhn–Tucker necessary conditions can be found and it is shown to be the optimal solution. The analytical results lead us to derive a solution procedure for determining the optimal order size and prices.

Keywords:

• inventory
• price
• deterministic demand
• order quantity