A stochastic theory of the firm
Mathematics of Operations Research
Dynamic pricing and ordering decisions by a monopolist
Management Science
Optimal monopolist pricing under demand uncertainty in dynamic markets
Management Science
An integrated production-inventory-marketing model for deteriorating items
Computers and Industrial Engineering
Clearance Pricing and Inventory Policies for Retail Chains
Management Science
Price Versus Production Postponement: Capacity and Competition
Management Science
Combined Pricing and Inventory Control Under Uncertainty
Operations Research
Note: The Newsvendor Model with Endogenous Demand
Management Science
Mathematics of Operations Research
Dynamic Pricing and the Direct-to-Customer Model in the Automotive Industry
Electronic Commerce Research
The generalized assignment problem with flexible jobs
Discrete Applied Mathematics
The Coordination of Pricing and Scheduling Decisions
Manufacturing & Service Operations Management
IEEE Transactions on Systems, Man, and Cybernetics, Part A: Systems and Humans - Special issue on recent advances in biometrics
An inventory system with two suppliers and default risk
Operations Research Letters
Hi-index | 0.01 |
We consider the problem of setting prices and choosing production quantities for a single product over a finite horizon for a capacity-constrained manufacturer facing price-sensitive demands. There is a fixed cost per production run and a variable cost per unit produced, both of which may vary by period. We characterize properties of the optimal solution, considering cases with constant and time-varying capacity, and with and without speculative motive for holding inventory. We show that, counter to intuition, optimal prices may increase as the capacity increases, even when capacity is constant over the horizon. We also show that increases in capacity do not always exhibit diminishing marginal returns. Our procedure produces solutions with much higher profits than can be obtained from a sophisticated sequential procedure in which a well-informed and optimum-seeking marketing department makes pricing decisions and the manufacturing department seeks to satisfy the resulting demands at minimum cost. Our results also suggest that firms with seasonal demand and tight capacity constraints should be more aggressive in setting prices to manage their demands than what is typically done in practice. Finally, we discuss how a decision maker can use our procedure as an aid in solving multiproduct versions of the problem.