Dynamic Inventory and Pricing Policy in a Periodic-Review Inventory System with Finite Ordering Capacity and Price Adjustment Cost

Abstract EN

We consider a dynamic inventory control and pricing optimizationproblem in a periodic-review inventory system with price adjustmentcost.

Each order occurs with a fixed ordering cost; the ordering quantityis capacitated.

We consider a sequential decision problem, where thefirm first chooses the ordering quantity and then the sale price tomaximize the expected total discounted profit over the sale horizon.

We show that the optimal inventory control is partiallycharacterized by a s, s′, p policy in four regions, and theoptimal pricing policy is dependent on the inventory level after thereplenishment decision.

We present some numerical examples toexplore the effects of various parameters on the optimal pricing andreplenishment policy.