Dynamic pricing of seasonal goods with spot and forward purchase demands

Authors:
Peng-Sheng You;Ta Cheng Chen
Affiliations:
Graduate Institute of Transportation & Logistics, National Chia-Yi University, Taiwan;Department of Information Management, National Formosa University, Taiwan
Venue:
Computers & Mathematics with Applications
Year:
2007

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Abstract

This paper deals with the problem of jointly determining the order size and dynamic prices for a perishable inventory system over a finite time planning horizon when firms simultaneously provide customers with a prompt delivery option and a delivery schedule option. Customers are segmented into two types, namely spot purchase customers and the forward purchase customers. Demands for both types of customers are assumed to be time and price dependent. The decision-maker of the inventory system is assumed to apply pricing policies to stimulate demand to improve revenues under the condition that customers with forward purchases may cancel their orders. A mathematical model is developed to find the optimal number of price settings, the optimal dynamic prices and the order quantity. A solution procedure is found to determine the optimal decisions.