(s, S) Optimality in Joint Inventory-Pricing Control: An Alternate Approach

Electronic Companion — “ s S Optimality in Joint Inventory - Pricing Control : An Alternate Approach

Optimality Results in Inventory-Pricing Control: An Alternate Approach

We study a stationary, single-stage inventory system, under periodic review, with fixed ordering costs and multiple sales levers (such as pricing, advertising, etc.). We show the optimality of (s, S)-type policies in these settings under both the backordering and lost-sales assumptions. Our proof is novel, more direct and easier to understand than earlier ones. ∗Department of Industrial Enginee...

(s, S) Optimality in Joint Inventory-Pricing Control: An Alternate Approach Online Appendices

Theorem A.1. If Condition 1 holds and K = 0, then, the optimal ordering policy for the finite horizon problem or the infinite horizon discounted profit problem has the following structure. If xt < y ∗, then order up to y∗, and set the sales lever to d∗. Otherwise, do not order. Proof. By Theorem 6.1 of Porteus (2002), it is easy to verify that (y∗,d∗) is the optimal action pair if xt < y∗. If x...

Optimality and Optimization of a Joint Pricing and Inventory-Control Policy for a Periodic-Review System

This paper considers a concurrent pricing and inventory control problem in a stochastic and periodic review setting. Demand in a period is random and depends on the posted price. Other than holding and backlogging costs, the system incurs stock-replenishment costs that consist of both variable and fixed components. At the beginning of each period, a simultaneous decision has to be made on stock...

Joint Pricing and Inventory Control for Seasonal and Substitutable Goods Mentioning the Symmetrical and Asymmetrical Substitution

Nowadays many well-known firms may produce similar products at different prices in order to remain in the competitive environment. The price differences may cause substitution condition which motivates the customers to substitute the similar cheaper product with an expensive one leading to an environment which is known as “customer-based price driven substitution”. This research proposes a new ...