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( s, S ) Optimality in Joint Inventory-Pricing Control: An Alternate Approach

Author

Listed:
  • Woonghee Tim Huh

    (Department of Industrial Engineering and Operations Research, Columbia University, New York, New York 10027)

  • Ganesh Janakiraman

    (Stern School of Business, New York University, New York, New York 10012)

Abstract

We study a stationary, single-stage inventory system, under periodic review, with fixed ordering costs and multiple sales levers (such as pricing, advertising, etc.). We show the optimality of ( s, S )-type policies in these settings under both the backordering and lost-sales assumptions. Our analysis is constructive and is based on a condition that we identify as being key to proving the ( s, S ) structure. This condition is entirely based on the single-period profit function and the demand model. Our optimality results complement the existing results in this area.

Suggested Citation

  • Woonghee Tim Huh & Ganesh Janakiraman, 2008. "( s, S ) Optimality in Joint Inventory-Pricing Control: An Alternate Approach," Operations Research, INFORMS, vol. 56(3), pages 783-790, June.
    • Handle: RePEc:inm:oropre:v:56:y:2008:i:3:p:783-790
    DOI: 10.1287/opre.1070.0462
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    References listed on IDEAS

    as
    1. Awi Federgruen & Aliza Heching, 1999. "Combined Pricing and Inventory Control Under Uncertainty," Operations Research, INFORMS, vol. 47(3), pages 454-475, June.
    2. Youhua (Frank) Chen & Saibal Ray & Yuyue Song, 2006. "Optimal pricing and inventory control policy in periodic‐review systems with fixed ordering cost and lost sales," Naval Research Logistics (NRL), John Wiley & Sons, vol. 53(2), pages 117-136, March.
    3. Yin, Rui & Rajaram, Kumar, 2007. "Joint pricing and inventory control with a Markovian demand model," European Journal of Operational Research, Elsevier, vol. 182(1), pages 113-126, October.
    4. Woonghee Tim Huh & Ganesh Janakiraman, 2008. "Inventory Management with Auctions and Other Sales Channels: Optimality of (s, S) Policies," Management Science, INFORMS, vol. 54(1), pages 139-150, January.
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