Title: Ordering and pricing policies for random discount offerings and permissible shortages

Authors: F.J. Arcelus, T.P.M. Pakkala, G. Srinivasan

Addresses: Emeritus Professor, University of New Brunswick, Canada and Departamento de Gestion de Empresas, Universidad Publica de Navarra, 31006 Pamplona, Navarra, Spain. ' Department of Statistics, Mangalore University, Mangalagangotri 574 199, India. ' Faculty of Administration, University of New Brunswick, P.O. Box 4400, Fredericton, N.B. E3B 5A3, Canada

Abstract: This study develops the ordering and pricing policies of a retailer, confronted with a price-dependent demand and a vendor offering a discount on the wholesale/regular price during sales sub-periods, which are repeated randomly and last for a random amount of time. The inventory level forms a regenerative stochastic process, with regeneration points at the start of the discount sub-periods. The objective is to maximise the long run expected profit per unit time, expressed as a function the order quantity, reorder level and retail price for regular and discount sub-periods.

Keywords: repetitive special sales; stochastic inventory; renewal reward theorem; ordering policies; pricing policies; random discount offerings; permissible shortages; operational research; order quantity; reorder level; retail price.

DOI: 10.1504/IJOR.2007.014170

International Journal of Operational Research, 2007 Vol.2 No.4, pp.400 - 413

Published online: 24 Jun 2007 *

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