IDEAS home Printed from https://ideas.repec.org/p/unm/umagsb/2014001.html
   My bibliography  Save this paper

The economic order decision with continuous dynamic pricing and batch supply

Author

Listed:
  • van den Berg, A.H.J.

    (Externe publicaties SBE)

  • Herings, P.J.J.

    (Microeconomics & Public Economics)

  • Peters, H.J.M.

    (Quantitative Economics)

Abstract

We study an infinite horizon model, where a seller orders his product in batches of fixed size. A sales strategy determines both the order moments and the sales path between these moments. Under some natural conditions on the seller’s revenue function, the strategy that maximizes the seller’s time-discounted revenue is determined. The optimal strategy is shown to be unique and is characterized by increasing prices in between order moments. We analyze the sensitivity of this strategy to the main parameters of the model: batch size, batch cost, and discount rate. Surprisingly, increasing batch sizes may lead to lower optimal order times.

Suggested Citation

  • van den Berg, A.H.J. & Herings, P.J.J. & Peters, H.J.M., 2014. "The economic order decision with continuous dynamic pricing and batch supply," Research Memorandum 001, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2014001
    DOI: 10.26481/umagsb.2014001
    as

    Download full text from publisher

    File URL: https://cris.maastrichtuniversity.nl/ws/files/1564419/guid-e2a6b508-1342-4134-93bc-56fe21c6b75c-ASSET1.0.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.26481/umagsb.2014001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Feichtinger, Gustav & Hartl, Richard, 1985. "Optimal pricing and production in an inventory model," European Journal of Operational Research, Elsevier, vol. 19(1), pages 45-56, January.
    2. Osborne, Martin J. & Pitchik, Carolyn, 1986. "Price competition in a capacity-constrained duopoly," Journal of Economic Theory, Elsevier, vol. 38(2), pages 238-260, April.
    3. 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.
    4. Jorgensen, Steffen & Kort, Peter M., 2002. "Optimal pricing and inventory policies: Centralized and decentralized decision making," European Journal of Operational Research, Elsevier, vol. 138(3), pages 578-600, May.
    5. van den Berg, Anita & Bos, Iwan & Herings, P. Jean-Jacques & Peters, Hans, 2012. "Dynamic Cournot duopoly with intertemporal capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 174-192.
    6. Gabriel Bitran & René Caldentey, 2003. "An Overview of Pricing Models for Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 203-229, August.
    7. Dov Pekelman, 1974. "Simultaneous Price-Production Decisions," Operations Research, INFORMS, vol. 22(4), pages 788-794, August.
    8. T. M. Whitin, 1955. "Inventory Control and Price Theory," Management Science, INFORMS, vol. 2(1), pages 61-68, October.
    9. Transchel, Sandra & Minner, Stefan, 2009. "The impact of dynamic pricing on the economic order decision," European Journal of Operational Research, Elsevier, vol. 198(3), pages 773-789, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hyun-soo Ahn & Mehmet Gümüş & Philip Kaminsky, 2007. "Pricing and Manufacturing Decisions When Demand Is a Function of Prices in Multiple Periods," Operations Research, INFORMS, vol. 55(6), pages 1039-1057, December.
    2. Transchel, Sandra & Minner, Stefan, 2009. "The impact of dynamic pricing on the economic order decision," European Journal of Operational Research, Elsevier, vol. 198(3), pages 773-789, November.
    3. Lihao Lu & Jianxiong Zhang & Wansheng Tang, 2016. "Optimal dynamic pricing and replenishment policy for perishable items with inventory-level-dependent demand," International Journal of Systems Science, Taylor & Francis Journals, vol. 47(6), pages 1480-1494, April.
    4. Lamas, Alejandro & Chevalier, Philippe, 2018. "Joint dynamic pricing and lot-sizing under competition," European Journal of Operational Research, Elsevier, vol. 266(3), pages 864-876.
    5. Transchel, Sandra & Minner, Stefan, 2011. "Economic lot-sizing and dynamic quantity competition," International Journal of Production Economics, Elsevier, vol. 133(1), pages 416-422, September.
    6. Fleischmann, M. & Hall, J.M. & Pyke, D.F., 2005. "A Dynamic Pricing Model for Coordinated Sales and Operations," ERIM Report Series Research in Management ERS-2005-074-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    7. Li, Xueping & Wang, Jiao & Sawhney, Rapinder, 2012. "Reinforcement learning for joint pricing, lead-time and scheduling decisions in make-to-order systems," European Journal of Operational Research, Elsevier, vol. 221(1), pages 99-109.
    8. Georgia Perakis & Melvyn Sim & Qinshen Tang & Peng Xiong, 2023. "Robust Pricing and Production with Information Partitioning and Adaptation," Management Science, INFORMS, vol. 69(3), pages 1398-1419, March.
    9. Vettas, Nikolaos & Kotseva, Rossitsa & Christou, Charalambos, 2007. "Pricing, Investments and Mergers with Intertemporal Capacity Constraints," CEPR Discussion Papers 6433, C.E.P.R. Discussion Papers.
    10. Kuo, Chia-Wei & Huang, Kwei-Long, 2012. "Dynamic pricing of limited inventories for multi-generation products," European Journal of Operational Research, Elsevier, vol. 217(2), pages 394-403.
    11. Li, Mengmeng & Mizuno, Shinji, 2022. "Comparison of dynamic and static pricing strategies in a dual-channel supply chain with inventory control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    12. Brian So, 2017. "An implementable optimization of airfare structure," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 16(5), pages 441-465, October.
    13. Elodie Adida & Georgia Perakis, 2007. "A nonlinear continuous time optimal control model of dynamic pricing and inventory control with no backorders," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(7), pages 767-795, October.
    14. K Kogan & U Spiegel, 2006. "Optimal policies for inventory usage, production and pricing of fashion goods over a selling season," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(3), pages 304-315, March.
    15. Transchel, Sandra & Minner, Stefan, 2009. "Dynamic pricing and replenishment in the warehouse scheduling problem--A common cycle approach," International Journal of Production Economics, Elsevier, vol. 118(1), pages 331-338, March.
    16. Shiming Deng & Candace A. Yano, 2006. "Joint Production and Pricing Decisions with Setup Costs and Capacity Constraints," Management Science, INFORMS, vol. 52(5), pages 741-756, May.
    17. Michael Dziecichowicz & Daniela Caro & Aurélie Thiele, 2015. "Robust timing of markdowns," Annals of Operations Research, Springer, vol. 235(1), pages 203-231, December.
    18. Chen, Jing & Bell, Peter C., 2009. "The impact of customer returns on pricing and order decisions," European Journal of Operational Research, Elsevier, vol. 195(1), pages 280-295, May.
    19. Vincent Mak & Amnon Rapoport & Eyran J. Gisches & Jiaojie Han, 2014. "Purchasing Scarce Products Under Dynamic Pricing: An Experimental Investigation," Manufacturing & Service Operations Management, INFORMS, vol. 16(3), pages 425-438, July.
    20. Schulte, Benedikt & Sachs, Anna-Lena, 2020. "The price-setting newsvendor with Poisson demand," European Journal of Operational Research, Elsevier, vol. 283(1), pages 125-137.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unm:umagsb:2014001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Andrea Willems or Leonne Portz (email available below). General contact details of provider: https://edirc.repec.org/data/meteonl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.