Coordination of Pricing and Multiple-Period Production Across Multiple Constant Priced Goods

This paper addresses the problem of jointly determining prices and production schedules for a set of items that are produced on the same production equipment. Under the assumptions that the production setup costs are negligible and that demand is seasonal but price dependent, we exploit the special...

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Bibliographic Details
Published in:Management science 2000-12, Vol.46 (12), p.1602-1616
Main Author: Gilbert, Stephen M
Format: Article
Language:English
Subjects:
Capital costs
Carrying costs
coordination of marketing and operations decisions
Decision making
Determinism
Iterative solutions
Management decisions
Marketing
Marketing management
Minimization of cost
Optimal solutions
Planning methods
Price elasticity
Prices
Pricing
Production
Production costs
Production planning
Seasonality
Studies
Unit costs
Variable costs
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Summary:This paper addresses the problem of jointly determining prices and production schedules for a set of items that are produced on the same production equipment. Under the assumptions that the production setup costs are negligible and that demand is seasonal but price dependent, we exploit the special structure of the problem to develop a solution procedure. Through a set of numerical examples, we demonstrate how a product's contribution to aggregate seasonality can increase its optimal price. Our examples also demonstrate that, among products that experience demand peaks during the firm's busy season, those that peak early in the busy season should be priced more aggressively than those that peak later.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.46.12.1602.12073