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Dynamic pricing policies for an inventory model with random windows of opportunities

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  • Arnoud den Boer
  • Ohad Perry
  • Bert Zwart

Abstract

We study a single‐product fluid‐inventory model in which the procurement price of the product fluctuates according to a continuous time Markov chain. We assume that a fixed order price, in addition to state‐dependent holding costs are incurred, and that the depletion rate of inventory is determined by the sell price of the product. Hence, at any time the controller has to simultaneously decide on the selling price of the product and whether to order or not, taking into account the current procurement price and the inventory level. In particular, the controller is faced with the question of how to best exploit the random time windows in which the procurement price is low. We consider two policies, derive the associated steady‐state distributions and cost functionals, and apply those cost functionals to study the two policies.© 2017 Wiley Periodicals, Inc. Naval Research Logistics 65: 660–675, 2018

Suggested Citation

  • Arnoud den Boer & Ohad Perry & Bert Zwart, 2018. "Dynamic pricing policies for an inventory model with random windows of opportunities," Naval Research Logistics (NRL), John Wiley & Sons, vol. 65(8), pages 660-675, December.
    • Handle: RePEc:wly:navres:v:65:y:2018:i:8:p:660-675
    DOI: 10.1002/nav.21737
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    References listed on IDEAS

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    Cited by:

    1. Srinivas R. Chakravarthy & B. Madhu Rao, 2021. "Queuing-Inventory Models with MAP Demands and Random Replenishment Opportunities," Mathematics, MDPI, vol. 9(10), pages 1-26, May.

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