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Coordinated pricing and inventory control problems with capacity constraints and fixed ordering cost

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  • Ju‐Liang Zhang
  • Jian Chen
  • Chung‐Yee Lee

Abstract

This article addresses a single‐item, finite‐horizon, periodic‐review coordinated decision model on pricing and inventory control with capacity constraints and fixed ordering cost. Demands in different periods are random and independent of each other, and their distributions depend on the price in the current period. Each period's stochastic demand function is the additive demand model. Pricing and ordering decisions are made at the beginning of each period, and all shortages are backlogged. The objective is to find an optimal policy that maximizes the total expected discounted profit. We show that the profit‐to‐go function is strongly CK‐concave, and the optimal policy has an (s,S,P) ‐like structure. © 2012 Wiley Periodicals, Inc. Naval Research Logistics, 2012

Suggested Citation

  • Ju‐Liang Zhang & Jian Chen & Chung‐Yee Lee, 2012. "Coordinated pricing and inventory control problems with capacity constraints and fixed ordering cost," Naval Research Logistics (NRL), John Wiley & Sons, vol. 59(5), pages 376-383, August.
    • Handle: RePEc:wly:navres:v:59:y:2012:i:5:p:376-383
    DOI: 10.1002/nav.21495
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    References listed on IDEAS

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    1. Awi Federgruen & Aliza Heching, 1999. "Combined Pricing and Inventory Control Under Uncertainty," Operations Research, INFORMS, vol. 47(3), pages 454-475, June.
    2. T. M. Whitin, 1955. "Inventory Control and Price Theory," Management Science, INFORMS, vol. 2(1), pages 61-68, October.
    3. Gallego, Guillermo & Scheller-Wolf, Alan, 2000. "Capacitated inventory problems with fixed order costs: Some optimal policy structure," European Journal of Operational Research, Elsevier, vol. 126(3), pages 603-613, November.
    4. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
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    Cited by:

    1. Guanqun Ni, 2023. "An improved online replenishment policy and its competitive ratio analysis for a purchase-to-order seller," Journal of Combinatorial Optimization, Springer, vol. 46(2), pages 1-14, September.
    2. Peng Hu & Ye Lu & Miao Song, 2019. "Joint Pricing and Inventory Control with Fixed and Convex/Concave Variable Production Costs," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 847-877, April.
    3. Saif Benjaafar & David Chen & Rowan Wang, 2017. "Managing Production-Inventory Systems with Scarce Resources," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 216-229, May.

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