The second purchase decision under selling price-sensitive stochastic demand and purchasing price uncertainty
by Xiangling Hu; Jaideep Motwani
International Journal of Operational Research (IJOR), Vol. 40, No. 4, 2021

Abstract: It is quite common for a retailer to stock a specific quantity of a product more than once during a certain time period and then sell the product to the customers during the selling season. The retailer also has the option to make a second purchase, as long as there is a potential profit increase on account of the purchase. Due to the stochastic spot market purchasing price and the selling price dependent random demand, the retailer needs to determine whether a second purchase is necessary and if so what are the corresponding order time, quantity, and selling price in order to maximise the expected profit. In this paper, we develop a reality-adaptable solution algorithm to simplify the solution procedure. We also run simulations to analyse the inventory decisions, and to compute the profits when a second purchase is possible.

Online publication date: Mon, 10-May-2021

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