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E‐retailer's dynamic inventory and pricing policy with price‐protection services

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  • Ling Zhao
  • Anquan Zou
  • Pin Zhou

Abstract

This paper investigates a coordinated inventory and pricing problem with the e‐retailer's price‐protection service over multiple periods. By solving a stochastic dynamic programming in the two‐dimensional state space, the optimal policy is fully characterized. Specifically, the inventory policy is a previous price‐dependent base‐stock policy. The pricing policy: as the previous price increases, the optimal current price stays unchanged first, then increases, and finally decreases. Numerical results indicate that with the impact of the price‐protection service increasing, the base‐stock level and current price rise under some conditions. Moreover, the price‐protection service benefits the e‐retailer when its impact is large enough.

Suggested Citation

  • Ling Zhao & Anquan Zou & Pin Zhou, 2023. "E‐retailer's dynamic inventory and pricing policy with price‐protection services," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 490-501, January.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:1:p:490-501
    DOI: 10.1002/mde.3695
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    References listed on IDEAS

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