Joint inventory and constant price decisions for a continuous review system

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dc.citation.epage202en_US
dc.citation.issueNumber2en_US
dc.citation.spage174en_US
dc.citation.volumeNumber42en_US
dc.contributor.authorÇomez, N.en_US
dc.contributor.authorKiessling, T.en_US
dc.date.accessioned2016-02-08T09:48:15Z
dc.date.available2016-02-08T09:48:15Z
dc.date.issued2012en_US
dc.departmentFaculty of Business Administrationen_US
dc.description.abstractPurpose: The purpose of this paper is to study joint inventory and pricing strategy for a continuous inventory review system. While dynamic pricing decisions are often studied in the literature along with inventory management, the authors' aim in this study is to obtain a single long-run optimal price; also to gain insight about how to obtain the optimal price and inventory control variables simultaneously and then the benefits of joint optimization of the inventory and pricing decisions over the sequential optimization policy often followed in practice. Design/methodology/approach: A general (R;Q) policy system with fixed cost of ordering is modelled and then the case where unsatisfied demand is lost is studied. General forms of both the additive and multiplicative demand models are used to obtain structural results. Findings: By showing optimality conditions on the price and inventory decision variables, two algorithms on how to obtain optimal decision variables, one for additive and another for multiplicative demand-price model are provided. Through extensive numerical analyses, the potential profit increases are reported if the price and inventory problem are solved simultaneously instead of sequentially. In addition, the sensitivities of optimal decision variables to system parameters are revealed. Practical implications: Although there are several studies in the literature investigating emergency price change models, they use arbitrary exogenous prices menus. However, the value of a price change can be better appreciated if the long-run price is optimal for the system. Originality/value: Very few researchers have investigated constant price and inventory optimization, and while there are several past studies demonstrating the benefits of dynamic pricing over a static one, there still are not many findings on the benefit of joint price and inventory optimization. © Emerald Group Publishing Limited.en_US
dc.description.provenanceMade available in DSpace on 2016-02-08T09:48:15Z (GMT). No. of bitstreams: 1 bilkent-research-paper.pdf: 70227 bytes, checksum: 26e812c6f5156f83f0e77b261a471b5a (MD5) Previous issue date: 2012en
dc.identifier.doi10.1108/09600031211219672en_US
dc.identifier.issn0960-0035
dc.identifier.urihttp://hdl.handle.net/11693/21575
dc.language.isoEnglishen_US
dc.publisherEmerald Groupen_US
dc.relation.isversionofhttp://dx.doi.org/10.1108/09600031211219672en_US
dc.source.titleInternational Journal of Physical Distribution and Logistics Managementen_US
dc.subjectDemand modelen_US
dc.subjectInventory controlen_US
dc.subjectLost salesen_US
dc.subjectOptimal pricingen_US
dc.subjectPricingen_US
dc.subjectR;Q policyen_US
dc.subjectSequential optimizationen_US
dc.titleJoint inventory and constant price decisions for a continuous review systemen_US
dc.typeArticleen_US

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