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Pricing, replenishment and preservation technology investment decisions for non-instantaneous deteriorating items

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  • Li, Guiping
  • He, Xiuli
  • Zhou, Jing
  • Wu, Hao

Abstract

This paper studies a joint pricing, replenishment and preservation technology investment problem for non-instantaneous deteriorating items. Preservation technology affects both the length of non-deterioration period and deterioration rate. Shortages are allowed and partially backlogged. We use price-dependent demand, time-varying deterioration and waiting-time-dependent backlog rates in a general framework to formulate the model. We consider two cases: shortages happen after or before the non-deterioration period. We analytically show the existence and uniqueness of the optimal replenishment schedule, price or preservation investment for any given two of them in two cases. We also prove that there exists a global replenishment policy for any given pricing and preservation investment policies. We then provide an iterative algorithm to search for the optimal solution. Finally, we use numerical examples to illustrate the algorithm, and conduct sensitivity analysis to derive more managerial insights.

Suggested Citation

  • Li, Guiping & He, Xiuli & Zhou, Jing & Wu, Hao, 2019. "Pricing, replenishment and preservation technology investment decisions for non-instantaneous deteriorating items," Omega, Elsevier, vol. 84(C), pages 114-126.
    • Handle: RePEc:eee:jomega:v:84:y:2019:i:c:p:114-126
    DOI: 10.1016/j.omega.2018.05.001
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