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Optimal Pricing and Production Policies of a Make-to-Stock System with Fluctuating Demand

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  • Jean-Philippe Gayon

    (G-SCOP_GCSP - Gestion et Conduite des Systèmes de Production - G-SCOP - Laboratoire des sciences pour la conception, l'optimisation et la production - UJF - Université Joseph Fourier - Grenoble 1 - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INPG - Institut National Polytechnique de Grenoble - CNRS - Centre National de la Recherche Scientifique)

  • Isilay Talay-Degirmenci

    (Duke University [Durham])

  • F. Karaesmen

    (Koç University)

  • L. Örmeci

    (Koç University)

Abstract

We study the effects of different pricing strategies available to a production–inventory system with capacitated supply, which operates in a fluctuating demand environment. The demand depends on the environment and on the offered price. For such systems, three plausible pricing strategies are investigated: static pricing, for which only one price is used at all times, environment-dependent pricing, for which price changes with the environment, and dynamic pricing, for which price depends on both the current environment and the stock level. The objective is to find an optimal replenishment and pricing policy under each of these strategies. This article presents some structural properties of optimal replenishment policies and a numerical study that compares the performances of these three pricing strategies.

Suggested Citation

  • Jean-Philippe Gayon & Isilay Talay-Degirmenci & F. Karaesmen & L. Örmeci, 2009. "Optimal Pricing and Production Policies of a Make-to-Stock System with Fluctuating Demand," Post-Print hal-00363686, HAL.
    • Handle: RePEc:hal:journl:hal-00363686
    DOI: 10.1017/S026996480900014X
    Note: View the original document on HAL open archive server: https://hal.science/hal-00363686
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    References listed on IDEAS

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