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Discount pricing policies for inventories subject to declining demand

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  • Amiya K. Chakravarty
  • G. E. Martin

Abstract

Until only recently, the mechanism behind determining item price has been ignored and the discount price taken as a given in quantity‐discount inventory decision problems. Inventory subject to declining demand further complicates both pricing and replenishment decisions. This article provides the vendor with the means for optimally determining both the discount price and replenishment order frequency for all buyers in the system in an environment of declining demand. In the multiple‐buyer case, we provide an efficient algorithm for classifying buyers into homogeneous subgroups to further enhance joint cost savings among all system participants.

Suggested Citation

  • Amiya K. Chakravarty & G. E. Martin, 1989. "Discount pricing policies for inventories subject to declining demand," Naval Research Logistics (NRL), John Wiley & Sons, vol. 36(1), pages 89-102, February.
    • Handle: RePEc:wly:navres:v:36:y:1989:i:1:p:89-102
    DOI: 10.1002/1520-6750(198902)36:13.0.CO;2-5
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    References listed on IDEAS

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    1. James P. Monahan, 1984. "A Quantity Discount Pricing Model to Increase Vendor Profits," Management Science, INFORMS, vol. 30(6), pages 720-726, June.
    2. A. K. Chakravarty & J. B. Orlin & U. G. Rothblum, 1985. "Consecutive Optimizers for a Partitioning Problem with Applications to Optimal Inventory Groupings for Joint Replenishment," Operations Research, INFORMS, vol. 33(4), pages 820-834, August.
    3. Hau L. Lee & Meir J. Rosenblatt, 1986. "A Generalized Quantity Discount Pricing Model to Increase Supplier's Profits," Management Science, INFORMS, vol. 32(9), pages 1177-1185, September.
    4. repec:inm:ormnsc:v:30:y:1984:i:12:p:1524-1539(2 is not listed on IDEAS
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    1. Benton, W. C. & Park, Seungwook, 1996. "A classification of literature on determining the lot size under quantity discounts," European Journal of Operational Research, Elsevier, vol. 92(2), pages 219-238, July.
    2. Sarmah, S.P. & Acharya, D. & Goyal, S.K., 2006. "Buyer vendor coordination models in supply chain management," European Journal of Operational Research, Elsevier, vol. 175(1), pages 1-15, November.
    3. Li, Pengdeng & Yang, Xiaofan & Wu, Yingbo & He, Weiyi & Zhao, Pengpeng, 2018. "Discount pricing in word-of-mouth marketing: An optimal control approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 505(C), pages 512-522.
    4. Li, Jianli & Liu, Liwen, 2006. "Supply chain coordination with quantity discount policy," International Journal of Production Economics, Elsevier, vol. 101(1), pages 89-98, May.
    5. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.

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