Retailer’s optimal pricing and lot-sizing policies for deteriorating items with partial backlogging

Pricing is a major strategy for a retailer to obtain its maximum profit. Therefore, in this paper, we establish an economic order quantity model for a retailer to determine its optimal selling price, replenishment number and replenishment schedule with partial backlogging. We first prove that the op...

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Bibliographic Details
Published in:European journal of operational research 2006, Vol.168 (1), p.51-64
Main Authors: Chang, Horng-Jinh, Teng, Jinn-Tsair, Ouyang, Liang-Yuh, Dye, Chung-Yuan
Format: Article
Language:English
Subjects:
Algorithms
Deteriorating items
Lot-sizing
Order quantity
Partial backlogging
Pricing
Pricing policies
Retailing
Studies
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Summary:Pricing is a major strategy for a retailer to obtain its maximum profit. Therefore, in this paper, we establish an economic order quantity model for a retailer to determine its optimal selling price, replenishment number and replenishment schedule with partial backlogging. We first prove that the optimal replenishment schedule not only exists but also is unique, for any given selling price. Next, we show that the total profit is a concave function of p when the replenishment number and schedule are given. We then provide a simple algorithm to find the optimal selling price, replenishment number and replenishment timing for the proposed model. Finally, we use a couple of numerical examples to illustrate the algorithm.
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2004.05.003