This paper studies intertemporal pricing policies when selling seasonal products in retail stores. We first present a continuous time model where a seller faces a stochastic arrival of customers with different valuations of the product. For this model, we characterize the optimal pricing policies as functions of time and inventory. We use this model as a benchmark against which we compare more realistic models that consider periodic pricing reviews. We show that the structure of the optimal pricing policies in this case is consistent with the procedures observed in practice; retail stores successively discount the product during the season and promote a liquidation sale at the end of the planning horizon. We also show that the loss experienced when implementing periodic pricing reviews instead of continuous policies is small when the appropriate number of reviews is chosen. Several interesting economic insights emerge from our analysis. For example, uncertainty in the demand for new products leads to higher prices, larger discounts, and more unsold inventory. Finally, we study the effect of announced discount policies on prices and profits. We show that stores that have adopted this type of strategy usually set prices such that with high probability the merchandise is sold during the first periods and the largest discounts rarely take place.dynamic pricing, retailing, stochastic models, dynamic programming

In this paper we study the computational complexity of the capacitated lot size problem with a particular cost structure that is likely to be used in practical settings. For the single item case new properties are introduced, classes of problems solvable by polynomial time algorithms are i.dentified, and efficient solution procedures are given. We show that special classes are N-hard, and that the problem with two items and independent setups is NP-hard under conditions similar to those where the single item problem is easy. Topics for further research are discussed in the last section, On leave from INPE, Brazil. Research partially supported by the Conselho National de Pesquisas, Brazil.

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Queueing networks have been used to model the performance of a variety of complex systems. Since exact results exist for only a limited class of networks, the decomposition methodology has been used extensively to obtain approximate results. In this paper, we consider open queueing networks with multiple product classes, deterministic routings and general arrival and service distributions. We examine the decomposition method for such systems and show that it provides estimates of key parameters with an accuracy that is not acceptable in many practical settings. Recognizing this weakness, we enrich the approach by modeling a phenomenon previously ignored. We consider interference among products and describe its effect on the variance of the departure streams. The recognition of this effect significantly improves the performance of this methodology. We provide extensive experimental results based on the data of a manufacturer of semiconductor devices.queues: networks, queues: approximations, networks/graphs: multicommodity

Catalog sales are among the fastest growing businesses in the U.S. The most important asset a company in this industry has is its list of customers, called the house list. Building a house list is expensive, since the response rate of names from rental lists is low. Cash management therefore plays a central role in this capital intensive business. This paper studies optimal mailing policies in the catalog sales industry when there is limited access to capital. We consider a stochastic environment given by the random responses of customers and a dynamic evolution of the house list. Given the size of real problems, it is impossible to compute the optimal solutions. We therefore develop a heuristic based on the optimal solutions of simplified versions of the problem. The performance of this heuristic is evaluated by comparing its outcome with an upper bound derived for the original problem. Computational experiments show that it behaves satisfactorily. The methodology presented permits the evaluation of potential catalog ventures thus proving useful to entrepreneurs in this industry.catalog sales, direct marketing, stochastic models, dynamic programming