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The economic order decision with continuous dynamic pricing and batch supply

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Author Info

  • Peters H.J.M.
  • Herings P.J.J.
  • Berg A.H.J. van den

    (GSBE)

Abstract

We study an infinite horizon model, where a seller orders his product in batches of fixed size. A sales strategy determines both the order moments and the sales path between these moments. Under some natural conditions on the sellers revenue function, the strategy that maximizes the sellers time-discounted revenue is determined. The optimal strategy is shown to be unique and is characterized by increasing prices in between order moments. We analyze the sensitivity of this strategy to the main parameters of the model batch size, batch cost, and discount rate. Surprisingly,increasing batch sizes may lead to lower optimal order times.

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File URL: http://pub.maastrichtuniversity.nl/e2a6b508-1342-4134-93bc-56fe21c6b75c
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Bibliographic Info

Paper provided by Maastricht University, Graduate School of Business and Economics (GSBE) in its series Research Memorandum with number 001.

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Date of creation: 2014
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Handle: RePEc:unm:umagsb:2014001

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Related research

Keywords: Optimization Techniques; Programming Models; Dynamic Analysis; Intertemporal Firm Choice and Growth; Financing; Investment; and Capacity; Production; Pricing; and Market Structure; Size Distribution of Firms;

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