On the Relationship Between Pricing and Capacity Decisions in Inventory Systems with Stochastic Demand
نویسندگان
چکیده
We address the simultaneous determination of pricing and capacity investment strategies in a multi-period setting under demand uncertainty. In our model a monopolistic firm makes three decisions: capacity investment (or disinvestment), production (inventory), and price, all of which can be specified dynamically as a function of the state of the system. We analyze the optimal joint strategy and through that investigate the relationships between the main strategic decision variables: price and capacity. We consider models that allow for either bi-directional price changes or models with markdowns only, and in the latter case we prove that capacity and price are strategic substitutes. Short Title: Relationship between pricing and capacity decisions
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