Dynamic Pricing and Ordering Decisions by a Monopolist

Management Science - Tập 38 Số 2 - Trang 240-262 - 1992
Arvind Rajan1, Rakesh Rakesh2, Richard Steinberg3
1Operations Research Department, AT&T Bell Laboratories, Holmdel, New Jersey 07733#TAB#
2Department of Mathematical Sciences, University of Delaware, Newark, Delaware, 19716
3Service Concept and Business Analysis Department, AT&T Bell Laboratories, Murray Hill, New Jersey 07974#TAB#

Tóm tắt

This paper considers the relationship between pricing and ordering decisions for a monopolistic retailer facing a known demand function where, over the inventory cycle, the product may exhibit: (i) physical decay or deterioration of inventory called wastage; and (ii) decrease in market value called value drop associated with each unit of inventory on hand. The retailer is allowed to continuously vary the selling price of the product over the cycle. We introduce a notion of instantaneous margin, and use it to derive profit maximizing conditions for the retailer. The model explains the markdown of retail goods subject to decay. It also provides guidance in determining when price changes during the cycle are worthwhile due to product aging, how often such changes should be made, and how such changes affect ordering intervals and quantities.

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Management Science

Tập 38 Số 2

240-262

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