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Joint pricing and ordering policy for exponentially decaying inventory with known demand

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  • Morris A. Cohen

Abstract

This paper is concerned with the problem of simultaneously setting price and production levels for an exponentially decaying product. Such products suffer a loss in utility which is proportional to the total quantity of stock on hand. A continuous review, deterministic demand model is considered. The optimal ordering decision quantity is derived and its sensitivity to changes in perishability and product price is considered. The joint ordering pricing decision is also computed and consideration of parametric changes of these decisions indicates a non‐monotonic response for optimal price to changes in product decay. Issues of market entry and extensions to a model with shortages are also analyzed.

Suggested Citation

  • Morris A. Cohen, 1977. "Joint pricing and ordering policy for exponentially decaying inventory with known demand," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 24(2), pages 257-268, June.
    • Handle: RePEc:wly:navlog:v:24:y:1977:i:2:p:257-268
    DOI: 10.1002/nav.3800240205
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    Cited by:

    1. Fateme Maleki & Saeed Yaghoubi & Atieh Fander, 2023. "Organic level vs. sales effort in coordination of green food supply chain for deteriorating items," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(11), pages 13065-13097, November.
    2. Chih-Te Yang & Yensen Ni & Mu-Hsiang Yu & Yuhsin Chen & Paoyu Huang, 2023. "Decoding the Profitability of Insurance Products: A Novel Approach to Evaluating Non-Participating and Participating Insurance Policies," Mathematics, MDPI, vol. 11(13), pages 1-16, June.
    3. Kaijie Zhu & Ulrich W. Thonemann, 2009. "Coordination of pricing and inventory control across products," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(2), pages 175-190, March.
    4. Monalisha Pattnaik & Padmabati Gahan, 2021. "Preservation effort effects on retailers and manufacturers in integrated multi-deteriorating item discrete supply chain model," OPSEARCH, Springer;Operational Research Society of India, vol. 58(2), pages 276-329, June.
    5. Ming-Fang Yang & Pei-Fang Tsai & Meng-Ru Tu & Yu-Fang Yuan, 2024. "An EOQ Model for Temperature-Sensitive Deteriorating Items in Cold Chain Operations," Mathematics, MDPI, vol. 12(5), pages 1-15, March.
    6. Beullens, Patrick & Ghiami, Yousef, 2022. "Waste reduction in the supply chain of a deteriorating food item – Impact of supply structure on retailer performance," European Journal of Operational Research, Elsevier, vol. 300(3), pages 1017-1034.
    7. Wen Chen & Adam J. Fleischhacker & Michael N. Katehakis, 2015. "Dynamic pricing in a dual‐market environment," Naval Research Logistics (NRL), John Wiley & Sons, vol. 62(7), pages 531-549, October.
    8. Chaitanyakumar N. Rapolu & Deepa H. Kandpal, 2020. "Joint pricing, advertisement, preservation technology investment and inventory policies for non-instantaneous deteriorating items under trade credit," OPSEARCH, Springer;Operational Research Society of India, vol. 57(2), pages 274-300, June.
    9. Hu, Benyong & Qu, Jiali & Meng, Chao, 2018. "Supply chain coordination under option contracts with joint pricing under price-dependent demand," International Journal of Production Economics, Elsevier, vol. 205(C), pages 74-86.

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