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TECHNICAL NOTE---A Computational Approach for Optimal Joint Inventory-Pricing Control in an Infinite-Horizon Periodic-Review System

Author

Listed:
  • Youyi Feng

    (Department of Management Science, The City University of Hong Kong, Hong Kong; Zaragoza Logistics Center, Zaragoza, Spain)

  • Youhua (Frank) Chen

    (Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Hong Kong)

Abstract

This note considers a joint inventory-pricing control problem in an infinite-horizon periodic-review system. Demand in a period is random and depends on the posted price. Besides the holding and shortage costs, the system incurs inventory-replenishment costs that consist of both variable and fixed components. At the beginning of each period, a joint inventory and pricing decision is made. Under the long-run average profit criterion, we show that an optimal policy exists within the class of so-called ( s , S , p ) policies. This is established based on our algorithmic development, which also results in an algorithm for finding an optimal ( s , S , p ) policy.

Suggested Citation

  • Youyi Feng & Youhua (Frank) Chen, 2011. "TECHNICAL NOTE---A Computational Approach for Optimal Joint Inventory-Pricing Control in an Infinite-Horizon Periodic-Review System," Operations Research, INFORMS, vol. 59(5), pages 1297-1303, October.
    • Handle: RePEc:inm:oropre:v:59:y:2011:i:5:p:1297-1303
    DOI: 10.1287/opre.1110.0984
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    References listed on IDEAS

    as
    1. Yuyue Song & Saibal Ray & Tamer Boyaci, 2009. "Technical Note---Optimal Dynamic Joint Inventory-Pricing Control for Multiplicative Demand with Fixed Order Costs and Lost Sales," Operations Research, INFORMS, vol. 57(1), pages 245-250, February.
    2. Yu-Sheng Zheng & A. Federgruen, 1991. "Finding Optimal (s, S) Policies Is About As Simple As Evaluating a Single Policy," Operations Research, INFORMS, vol. 39(4), pages 654-665, August.
    3. Arthur F. Veinott, Jr. & Harvey M. Wagner, 1965. "Computing Optimal (s, S) Inventory Policies," Management Science, INFORMS, vol. 11(5), pages 525-552, March.
    4. 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.
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    Cited by:

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    2. Ying Wei, 2020. "Optimizing constant pricing and inventory decisions for a periodic review system with batch ordering," Annals of Operations Research, Springer, vol. 291(1), pages 939-957, August.
    3. Hong Chen & Zhan Zhang, 2014. "Technical Note—Joint Inventory and Pricing Control with General Additive Demand," Operations Research, INFORMS, vol. 62(6), pages 1335-1343, December.
    4. Van Foreest, Nicky D. & Kilic, Onur A., 2023. "An intuitive approach to inventory control with optimal stopping," European Journal of Operational Research, Elsevier, vol. 311(3), pages 921-924.
    5. Gan, Xianghua & Sethi, Suresh P. & Xu, Liang, 2019. "Simultaneous Optimization of Contingent and Advance Purchase Orders with Fixed Ordering Costs," Omega, Elsevier, vol. 89(C), pages 227-241.
    6. Fernando Bernstein & Yang Li & Kevin Shang, 2016. "A Simple Heuristic for Joint Inventory and Pricing Models with Lead Time and Backorders," Management Science, INFORMS, vol. 62(8), pages 2358-2373, August.

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