Price Dependent Inventory Model with Discount Offers at Random Times

Publication Type

Journal Article

Publication Date

6-2002

Abstract

An inventory model with a supplier offering discounts to a reseller at random epochs is considered. The offer is accepted when the inventory position is lower than a threshold level. Three different pricing policies in which demand is induced by the reseller's price variation are compared. Policy I is the EOQ policy without discount offers. Policy 2 is a uniform price, stock-independent policy. Policy 3 is a stock level-dependent, discriminated price policy. Assuming constant demand rates, expressions are obtained for the optimal order quantities, prices, and profits. The numerical experiments show that if it is better to accept a supplier's discount, then it benefits the reseller to transfer the discount to downstream customers.

Keywords

Inventory management, random discount offers, pricing, lot sizing

Discipline

Operations and Supply Chain Management | Operations Research, Systems Engineering and Industrial Engineering

Research Areas

Operations Management

Publication

Production and Operations Management

Volume

11

Issue

2

First Page

139

Last Page

156

ISSN

1059-1478

Identifier

10.1111/j.1937-5956.2002.tb00488.x

Publisher

Wiley

Additional URL

https://doi.org/10.1111/j.1937-5956.2002.tb00488.x

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