COORDINATING PRICING AND INVENTORY DECISIONS IN A BOUNDED PRODUCTION SYSTEM WITH UNCERTAIN YIELD

Most inventory researches assume that production level can fluctuate arbitrarily. However, large fluctuation of the production level in many firms may be much costly. This paper addresses the coordinating pricing and inventory control problem in a bounded production system with uncertain yield, in w...

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Bibliographic Details
Published in:Journal of systems science and systems engineering 2010-12, Vol.19 (4), p.481-495
Main Authors: Zhang, Juliang, Li, Yongjian, Lai, Minghui
Format: Article
Language:English
Subjects:
Complexity
Economic Theory/Quantitative Economics/Mathematical Methods
Engineering
Inventory control
Operations Research/Decision Theory
Pricing
价格政策
控制问题
生产水
生产系统
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Summary:Most inventory researches assume that production level can fluctuate arbitrarily. However, large fluctuation of the production level in many firms may be much costly. This paper addresses the coordinating pricing and inventory control problem in a bounded production system with uncertain yield, in which the production level is constrained between a maximum and minimum level in each period and the price can be adjusted dynamically. We show that the optimal policy is the interval base-stock-list-price policy. Also, we study the impact of the production bounds and uncertainty of the yield on the production system. Numerical experiments are also performed to study the impact of parameters on the system.
ISSN:1004-3756
1861-9576
DOI:10.1007/s11518-010-5148-4