Inventory and pricing strategies for deteriorating items with shortages: A discounted cash flow approach

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Title:	Inventory and pricing strategies for deteriorating items with shortages: A discounted cash flow approach
Authors:	Dye, Chung-yuan;歐陽良裕;Ouyang, Liang-yuh;Hsieh, Tsu-pang
Contributors:	淡江大學經營決策學系
Keywords:	EOQ;Pricing;Time-value of money;Deterioration;Shortages
Date:	2007-02
Issue Date:	2009-11-30 12:23:18 (UTC+8)
Publisher:	Elsevier
Abstract:	In this article, we consider an infinite horizon, single product economic order quantity where demand and deterioration rate are continuous and differentiable function of price and time, respectively. In addition, we allow for shortages and completely backlogged. The objective is to find the optimal inventory and pricing strategies maximizing the net present value of total profit over the infinite horizon. For any given selling price, we first prove that the optimal replenishment schedule not only exists but is unique. Next, we show that the total profit per unit time is a concave function of price when the replenishment schedule is given. We then provide a simple algorithm to find the optimal selling price and replenishment schedule for the proposed model. Finally, we use a couple of numerical examples to illustrate the algorithm.
Relation:	Computers & Industrial Engineering 52(1), pp.29-40
DOI:	10.1016/j.cie.2006.10.009
Appears in Collections:	[Department of Management Sciences] Journal Article

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