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Technical Note---A Note on the Structure of Joint Inventory-Pricing Control with Leadtimes

Author

Listed:
  • Zhan Pang

    (Department of Management Science, Lancaster University, Lancaster LA1 4YX, United Kingdom)

  • Frank Y. Chen

    (Department of Management Science, City University of Hong Kong, Hong Kong)

  • Youyi Feng

    (MIT-Zaragoza International Logistics Program, Zaragoza Logistics Center, Zaragoza 50197, Spain)

Abstract

We consider a joint inventory-pricing control problem for a periodic-review, single-stage inventory system with a positive order leadtime and a linear order cost. Demands in consecutive periods are independent, but their distributions depend on the price in accordance with a stochastic demand function of additive form. Pricing and ordering decisions are made simultaneously at the beginning of each period. The objective is to maximize the total expected discounted profit over a finite horizon. We partially characterize the structure of the optimal joint ordering and pricing policies. We also show that our structural analysis can be extended to a multistage (or serial) inventory system with constant or stochastic leadtimes and an assemble-to-order system with price-sensitive demand.

Suggested Citation

  • Zhan Pang & Frank Y. Chen & Youyi Feng, 2012. "Technical Note---A Note on the Structure of Joint Inventory-Pricing Control with Leadtimes," Operations Research, INFORMS, vol. 60(3), pages 581-587, June.
    • Handle: RePEc:inm:oropre:v:60:y:2012:i:3:p:581-587
    DOI: 10.1287/opre.1120.1052
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    References listed on IDEAS

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