Optimal dynamic pricing and replenishment policy for perishable items with inventory-level-dependent demand

Abstract

An inventory system for perishable items with limited replenishment capacity is introduced in this paper. The demand rate depends on the stock quantity displayed in the store as well as the sales price. With the goal to realise profit maximisation, an optimisation problem is addressed to seek for the optimal joint dynamic pricing and replenishment policy which is obtained by solving the optimisation problem with Pontryagin's maximum principle. A joint mixed policy, in which the sales price is a static decision variable and the replenishment rate remains to be a dynamic decision variable, is presented to compare with the joint dynamic policy. Numerical results demonstrate the advantages of the joint dynamic one, and further show the effects of different system parameters on the optimal joint dynamic policy and the maximal total profit.

Optimal dynamic pricing and replenishment cycle for non-instantaneous deterioration items with inventory-level-dependent demand

“…Yang (2014) developed an inventory model under a stock-dependent demand rate and stock-dependent holding cost rate with relaxed terminal conditions to determine the optimal order quantity and the ending inventory level. An optimal control model for perishable item was established by Lu et al (2014) to seek the optimal joint dynamic pricing and replenishment strategy, where the demand rate dependent on the on-hand stocks and the sales price.…”

Dynamic pricing for inventories with reference price effects

“…Dye and Yang (2016) and Xue et al (2016) study the optimal pricing of deteriorating items in the presence of a reference price. Demand depending on inventory is analyzed by Lu et al (2016) and Hsieh and Dye (2017). Previous research use parametric demand functions.…”

Two phases inventory model with variable cycle length under discount policy

“…Pal et al [22] developed an inventory model with stock and price dependent demand under inflation along with a permissible delay in payments. Some authors Zhang et al [41], Lu et al [17] use Pontryagin's maximum principle to solve the problem of maximization of profit in an inventory model with stock and price dependent demand. An inventory model for a seasonal perishable product is developed by Mishra et al [18].…”