Note---Pricing and Inventory Control for a Perishable Product

Authors:
Yanzhi Li;Andrew Lim;Brian Rodrigues
Affiliations:
Department of Management Sciences, City University of Hong Kong, Kowloon, Hong Kong;Department of Management Sciences, City University of Hong Kong, Kowloon, Hong Kong;Lee Kong Chian School of Business, Singapore Management University, Singapore 178899
Venue:
Manufacturing & Service Operations Management
Year:
2009

Citing 7
Cited 3

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Abstract

In this note, we study the concurrent determination of pricing and inventory replenishment decisions for a perishable product in an infinite horizon. Demands in consecutive periods are independent and influenced by prices charged in each period. In particular, we treat price as a decision variable to maximize the total discounted profit. We analyze the optimal solution-structure of a two-period lifetime problem and from insights gained in numerical experiments, develop a base-stock/list-price heuristic policy for products with arbitrary fixed lifetimes. Experiments show this policy to be effective.