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An inventory model for a deteriorating item with price-dependent demand and special sale

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  • T. Roy
  • K.S. Chaudhuri

Abstract

Strategy of pricing is a major one for a manager of any economic sector to obtain its maximum profit. Therefore, in this article, we introduce here an order-level inventory model for a deteriorating item, taking the demand to be dependent on the sale price of the item to determine its optimal selling price and net profit. Also the concept of the special sale campaign for a festive season or for the purpose of clearance sale by way of price reduction is incorporated into the model. It is seen that the economic sector runs on a net loss without price reduction and special sale campaign. This is proved in theory and should be followed in practice. We compare two models of without special sale (Model I) and with special sale (Model II). The model is solved analytically and a numerical simulation of the results is carried out for a given data set. Sensitivity of the model for different values of G to changes in the parameter values is also examined.

Suggested Citation

  • T. Roy & K.S. Chaudhuri, 2007. "An inventory model for a deteriorating item with price-dependent demand and special sale," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 2(2), pages 173-187.
    • Handle: RePEc:ids:ijores:v:2:y:2007:i:2:p:173-187
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    Citations

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    Cited by:

    1. Avi Herbon & Uriel Spiegel & Joseph Templeman, 2012. "Simulation study of the price differentiation effect in a stochastic deteriorating inventory with heterogeneous consumers -- freshness sensitivity," Applied Economics, Taylor & Francis Journals, vol. 44(24), pages 3101-3119, August.
    2. Mohini Kumari & T. P. M. Pakkala, 2016. "Inventory policy for deteriorating items under trade credit when time of payment is uncertain," OPSEARCH, Springer;Operational Research Society of India, vol. 53(1), pages 178-196, March.
    3. Herbon, Avi & Levner, Eugene & Cheng, T.C.E., 2014. "Perishable inventory management with dynamic pricing using time–temperature indicators linked to automatic detecting devices," International Journal of Production Economics, Elsevier, vol. 147(PC), pages 605-613.
    4. Herbon, Avi & Khmelnitsky, Eugene, 2017. "Optimal dynamic pricing and ordering of a perishable product under additive effects of price and time on demand," European Journal of Operational Research, Elsevier, vol. 260(2), pages 546-556.
    5. Jing Lu & Jianxiong Zhang & Fuxiao Lu & Wansheng Tang, 2020. "Optimal pricing on an age-specific inventory system for perishable items," Operational Research, Springer, vol. 20(2), pages 605-625, June.

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