IDEAS home Printed from https://ideas.repec.org/p/cor/louvrp/2938.html
   My bibliography  Save this paper

Joint dynamic pricing and lot-sizing under competition

Author

Listed:
  • Alejandro Lamas
  • Philippe Chevalier

Abstract

We study the joint dynamic pricing and lot-sizing problem when firms operate in a competitive environment. Bearing in mind that a dynamic pricing strategy is successful when customers understand it, we assume each firm selects prices from a discrete set. The problem corresponds to a Bertrand model, so the pricing strategies of the firms should constitute a Nash Equilibrium. Given the combinatorial nature of the decisions, computing the equilibrium in a tractable time may not be feasible for larger instances. In order to compute the equilibrium efficiently, we propose a framework consisting of solving iteratively Mixed Integer Programming formulations. The framework reduces the complexity of the problem by using the fact that pricing and inventory planning remain stable to marginal variations in competitors’ prices.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Alejandro Lamas & Philippe Chevalier, 2018. "Joint dynamic pricing and lot-sizing under competition," LIDAM Reprints CORE 2938, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2938
    Note: In : European Journal of Operations Research, 266, 864-876, 2018
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Shiming Deng & Candace A. Yano, 2006. "Joint Production and Pricing Decisions with Setup Costs and Capacity Constraints," Management Science, INFORMS, vol. 52(5), pages 741-756, May.
    2. Howard Kunreuther & Linus Schrage, 1973. "Joint Pricing and Inventory Decisions for Constant Priced Items," Management Science, INFORMS, vol. 19(7), pages 732-738, March.
    3. Elodie Adida & Georgia Perakis, 2010. "Dynamic Pricing and Inventory Control: Uncertainty and Competition," Operations Research, INFORMS, vol. 58(2), pages 289-302, April.
    4. Martel, Alain & Gascon, Andre, 1998. "Dynamic lot-sizing with price changes and price-dependent holding costs," European Journal of Operational Research, Elsevier, vol. 111(1), pages 114-128, November.
    5. Dimitris Bertsimas & Aurélie Thiele, 2006. "A Robust Optimization Approach to Inventory Theory," Operations Research, INFORMS, vol. 54(1), pages 150-168, February.
    6. Transchel, Sandra & Minner, Stefan, 2011. "Economic lot-sizing and dynamic quantity competition," International Journal of Production Economics, Elsevier, vol. 133(1), pages 416-422, September.
    7. T. M. Whitin, 1955. "Inventory Control and Price Theory," Management Science, INFORMS, vol. 2(1), pages 61-68, October.
    8. Joseph Thomas, 1970. "Price-Production Decisions with Deterministic Demand," Management Science, INFORMS, vol. 16(11), pages 747-750, July.
    9. Aurelio Mauri, 2007. "Yield management and perceptions of fairness in the hotel business," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(2), pages 284-293, June.
    10. Jung, Hoon & Klein, Cerry M., 2006. "Optimal inventory policies for profit maximizing EOQ models under various cost functions," European Journal of Operational Research, Elsevier, vol. 174(2), pages 689-705, October.
    11. Gérard P. Cachon & Patrick T. Harker, 2002. "Competition and Outsourcing with Scale Economies," Management Science, INFORMS, vol. 48(10), pages 1314-1333, October.
    12. Wolsey, L. A., 1995. "Progress with single-item lot-sizing," LIDAM Reprints CORE 1174, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Wolsey, Laurence A., 1995. "Progress with single-item lot-sizing," European Journal of Operational Research, Elsevier, vol. 86(3), pages 395-401, November.
    14. Feichtinger, Gustav & Hartl, Richard, 1985. "Optimal pricing and production in an inventory model," European Journal of Operational Research, Elsevier, vol. 19(1), pages 45-56, January.
    15. Ray, Saibal & Gerchak, Yigal & Jewkes, Elizabeth M., 2005. "Joint pricing and inventory policies for make-to-stock products with deterministic price-sensitive demand," International Journal of Production Economics, Elsevier, vol. 97(2), pages 143-158, August.
    16. Bhattacharjee, Sudip & Ramesh, R., 2000. "A multi-period profit maximizing model for retail supply chain management: An integration of demand and supply-side mechanisms," European Journal of Operational Research, Elsevier, vol. 122(3), pages 584-601, May.
    17. Kim, DaeSoo & Lee, Won J., 1998. "Optimal joint pricing and lot sizing with fixed and variable capacity," European Journal of Operational Research, Elsevier, vol. 109(1), pages 212-227, August.
    18. Brahimi, Nadjib & Dauzere-Peres, Stephane & Najid, Najib M. & Nordli, Atle, 2006. "Single item lot sizing problems," European Journal of Operational Research, Elsevier, vol. 168(1), pages 1-16, January.
    19. Gilbert, Stephen M., 1999. "Coordination of pricing and multi-period production for constant priced goods," European Journal of Operational Research, Elsevier, vol. 114(2), pages 330-337, April.
    20. Stephen M. Gilbert, 2000. "Coordination of Pricing and Multiple-Period Production Across Multiple Constant Priced Goods," Management Science, INFORMS, vol. 46(12), pages 1602-1616, December.
    21. Bonsall, Peter & Shires, Jeremy & Maule, John & Matthews, Bryan & Beale, Jo, 2007. "Responses to complex pricing signals: Theory, evidence and implications for road pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(7), pages 672-683, August.
    22. Karimi, B. & Fatemi Ghomi, S. M. T. & Wilson, J. M., 2003. "The capacitated lot sizing problem: a review of models and algorithms," Omega, Elsevier, vol. 31(5), pages 365-378, October.
    23. Dov Pekelman, 1974. "Simultaneous Price-Production Decisions," Operations Research, INFORMS, vol. 22(4), pages 788-794, August.
    24. 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.
    25. Chen, Miao-Sheng & Chu, Mei-Chen, 2003. "The analysis of optimal control model in matching problem between manufacturing and marketing," European Journal of Operational Research, Elsevier, vol. 150(2), pages 293-303, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ma, Junhai & Si, Fengshan & Zhang, Qin & Wang, Zongxian, 2024. "Impact of extended warranty service on product pricing in online direct retailers' competitive market," Energy Economics, Elsevier, vol. 129(C).
    2. Qiu, Ruozhen & Sun, Yue & Zhou, Hongcheng & Sun, Minghe, 2023. "Dynamic pricing and quick response of a retailer in the presence of strategic consumers: A distributionally robust optimization approach," European Journal of Operational Research, Elsevier, vol. 307(3), pages 1270-1298.
    3. Li, Mengmeng & Mizuno, Shinji, 2022. "Comparison of dynamic and static pricing strategies in a dual-channel supply chain with inventory control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    4. Liu, Yezheng & Qian, Yang & Jiang, Yuanchun & Shang, Jennifer, 2020. "Using favorite data to analyze asymmetric competition: Machine learning models," European Journal of Operational Research, Elsevier, vol. 287(2), pages 600-615.
    5. Gao, Kaiye & Peng, Rui & Qu, Li & Wu, Shaomin, 2020. "Jointly optimizing lot sizing and maintenance policy for a production system with two failure modes," Reliability Engineering and System Safety, Elsevier, vol. 202(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brahimi, Nadjib & Absi, Nabil & Dauzère-Pérès, Stéphane & Nordli, Atle, 2017. "Single-item dynamic lot-sizing problems: An updated survey," European Journal of Operational Research, Elsevier, vol. 263(3), pages 838-863.
    2. Shiming Deng & Candace A. Yano, 2006. "Joint Production and Pricing Decisions with Setup Costs and Capacity Constraints," Management Science, INFORMS, vol. 52(5), pages 741-756, May.
    3. Hyun-soo Ahn & Mehmet Gümüş & Philip Kaminsky, 2007. "Pricing and Manufacturing Decisions When Demand Is a Function of Prices in Multiple Periods," Operations Research, INFORMS, vol. 55(6), pages 1039-1057, December.
    4. Li, Xueping & Wang, Jiao & Sawhney, Rapinder, 2012. "Reinforcement learning for joint pricing, lead-time and scheduling decisions in make-to-order systems," European Journal of Operational Research, Elsevier, vol. 221(1), pages 99-109.
    5. Abhijit Upasani & Reha Uzsoy, 2008. "Incorporating manufacturing lead times in joint production-marketing models: A review and some future directions," Annals of Operations Research, Springer, vol. 161(1), pages 171-188, July.
    6. Bajwa, Naeem & Sox, Charles R. & Ishfaq, Rafay, 2016. "Coordinating pricing and production decisions for multiple products," Omega, Elsevier, vol. 64(C), pages 86-101.
    7. W K Chiang & Y Feng, 2010. "Retailer or e-tailer? Strategic pricing and economic-lot-size decisions in a competitive supply chain with drop-shipping," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(11), pages 1645-1653, November.
    8. Wu, Xiang & (Yale) Gong, Yeming & Xu, Haoxuan & Chu, Chengbin & Zhang, Jinlong, 2017. "Dynamic lot-sizing models with pricing for new products," European Journal of Operational Research, Elsevier, vol. 260(1), pages 81-92.
    9. van den Heuvel, Wilco & Wagelmans, Albert P.M., 2006. "A polynomial time algorithm for a deterministic joint pricing and inventory model," European Journal of Operational Research, Elsevier, vol. 170(2), pages 463-480, April.
    10. Zhi-Long Chen & Nicholas G. Hall, 2010. "The Coordination of Pricing and Scheduling Decisions," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 77-92, April.
    11. Transchel, Sandra & Minner, Stefan, 2009. "The impact of dynamic pricing on the economic order decision," European Journal of Operational Research, Elsevier, vol. 198(3), pages 773-789, November.
    12. Lap Mui Ann Chan & David Simchi-Levi & Julie Swann, 2006. "Pricing, Production, and Inventory Policies for Manufacturing with Stochastic Demand and Discretionary Sales," Manufacturing & Service Operations Management, INFORMS, vol. 8(2), pages 149-168, January.
    13. Awi Federgruen & Joern Meissner, 2009. "Competition under time‐varying demands and dynamic lot sizing costs," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(1), pages 57-73, February.
    14. Geunes, Joseph & Merzifonluoglu, Yasemin & Romeijn, H. Edwin, 2009. "Capacitated procurement planning with price-sensitive demand and general concave-revenue functions," European Journal of Operational Research, Elsevier, vol. 194(2), pages 390-405, April.
    15. Jian Yang & Xiaolong Zhang, 2009. "Coordinated dynamic control of marketing and production," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(4), pages 348-365, June.
    16. Helber, Stefan & Sahling, Florian, 2010. "A fix-and-optimize approach for the multi-level capacitated lot sizing problem," International Journal of Production Economics, Elsevier, vol. 123(2), pages 247-256, February.
    17. LAMAS, ALEJANDRO & CHEVALIER, Philippe, 2013. "Jumping the hurdles for collaboration: fairness in operations pooling in the absence of transfer payments," LIDAM Discussion Papers CORE 2013073, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    18. van den Heuvel, W. & Kundakcioglu, O.E. & Geunes, J. & Romeijn, H.E. & Sharkey, T.C. & Wagelmans, A.P.M., 2007. "Integrated market selection and production planning: complexity and solution approaches," Econometric Institute Research Papers EI 2007-45, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    19. Wolter, Anja & Helber, Stefan, 2013. "Simultaneous Production and Maintenance Planning for a Single Capacitated Resource facing both a Dynamic Demand and Intensive Wear and Tear," Hannover Economic Papers (HEP) dp-522, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    20. Georgia Perakis & Melvyn Sim & Qinshen Tang & Peng Xiong, 2023. "Robust Pricing and Production with Information Partitioning and Adaptation," Management Science, INFORMS, vol. 69(3), pages 1398-1419, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cor:louvrp:2938. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alain GILLIS (email available below). General contact details of provider: https://edirc.repec.org/data/coreebe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.