A STUDY ON OPTIMAL ORDERING AND PRICING POLICY UNDER PROBABILISTIC DEMAND AND QUANTITY DISCOUNT FOR EXTENDED NEWSBOY PROBLEM

ABSTRACT

In this paper, we find out the optimal ordering quantity and pricing policy to maximize the total expected profit for perishable goods. The conditions of this study are following: 1. Two-stage pricing: the one is before validating-date, the other is after, 2. Before validating-date, the demand is a probabilistic random variable, 3. With quantity discount in incoming purchase, 4. The decision object is retailer. Applied optimization technique and computerize numerical analysis method, we narrow down the searching area sequentially and find out optimal solution finally. Six conclusions are drawn for future applications and studies.

Keywords:

• perishable goods
• two-stage pricing
• probabilistic demand
• quantity discount