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Joint pricing and inventory decisions for substitutable and perishable products under demand uncertainty

Fang, Fei, Nguyen, Tri-Dung, Currie, Christine S.M. (2021) Joint pricing and inventory decisions for substitutable and perishable products under demand uncertainty. European Journal of Operational Research, 293 (2). pp. 594-602. ISSN 0377-2217. (doi:10.1016/j.ejor.2020.08.002) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:93634)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL:
http://dx.doi.org/10.1016/j.ejor.2020.08.002

Abstract

In this paper, we develop a model for dynamic pricing and inventory decisions for multiple substitutable and perishable products under a multiple-period lifetime. Retailers place orders at the beginning of the first period, and products will be sold at full price during that period. All leftover products will then be carried over to the subsequent periods and sold at discounted prices. Demands for leftover products are assumed to follow a linear stochastic model depending on the discounted prices of the substitutable products. The optimal order quantities and prices are obtained by maximizing the total expected profit over the lifetime, taking into account the revenue, the backorder cost and the holding cost. We provide analytical properties of the optimal policy such as the concavity of the value functions and then utilise these in the numerical scheme for finding the optimal prices and ordering quantities. Experimental results are reported through a case study of a high-street fashion company, demonstrating the benefits of considering pricing and inventory decisions simultaneously for substitutable products.

Item Type: Article
DOI/Identification number: 10.1016/j.ejor.2020.08.002
Uncontrolled keywords: Pricing, Inventory, Demand uncertainty, Dynamic programming, Perishable products, Substitution
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Analytics, Operations and Systems
Depositing User: Tri-Dung Nguyen
Date Deposited: 17 Mar 2022 14:46 UTC
Last Modified: 18 Mar 2022 10:19 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/93634 (The current URI for this page, for reference purposes)

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