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Dynamic pricing and production control for perishable products under uncertain environment

Author

Listed:
  • Ruishu Shi

    (Hebei University)

  • Cuilian You

    (Hebei University
    Hebei University)

Abstract

In actual dynamic system, uncertainty is absolute and certainty is relative. This paper presents the optimal dynamic pricing and production control strategy for perishable products in finite horizon. The influence of external environmental disturbance on the system is considered by means of a special uncertain process (Liu process). Then based on uncertainty theory and Hurwicz criterion, the optimization model is built, where control variables are restricted to an admissible control set. In addition, uncertain differential equation is used to describe the changes of inventory. By applying the optimality equation, we determine the optimal price and production strategy to maximize profit. Besides, both the optimal price and production rate are linearly decreasing with inventory. Afterwards, two numerical examples are given, the results reveal that reducing the uncertain disturbance of inventory and expanding the potential market size are beneficial to improving the optimal profit. Moreover, risk-loving decision makers can gain more profits while facing large risks.

Suggested Citation

  • Ruishu Shi & Cuilian You, 2023. "Dynamic pricing and production control for perishable products under uncertain environment," Fuzzy Optimization and Decision Making, Springer, vol. 22(3), pages 359-386, September.
    • Handle: RePEc:spr:fuzodm:v:22:y:2023:i:3:d:10.1007_s10700-022-09396-x
    DOI: 10.1007/s10700-022-09396-x
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    References listed on IDEAS

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    5. Lihao Lu & Qinglong Gou & Wansheng Tang & Jianxiong Zhang, 2016. "Joint pricing and advertising strategy with reference price effect," International Journal of Production Research, Taylor & Francis Journals, vol. 54(17), pages 5250-5270, September.
    6. Xuxiang Luo & Zaiming Liu & Jinbiao Wu, 2020. "Dynamic Pricing and Optimal Control for a Stochastic Inventory System with Non-Instantaneous Deteriorating Items and Partial Backlogging," Mathematics, MDPI, vol. 8(6), pages 1-22, June.
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