Title: Effect of new inflation-brought competitive purchasing and leasing demand functions on revenue of a joint inventory-pricing decision making model

Authors: Sina Keyhanian; Masoud Rabbani

Addresses: Department of Industrial Engineering and Management Systems, Amirkabir University of Technology (Tehran Polytechnic), Room 41, 424 Hafez Ave., Tehran, Iran; Faculty of Mathematics and Natural Sciences, Institute for Technology, Engineering and Management, University of Groningen, Nijenborgh 4, 9747 AG Groningen, The Netherlands ' Faculty of Engineering, Department of Industrial Engineering, University of Tehran, 16th of Azar Street, Enghelab Ave., P.O. Box 11155-4563, Tehran, Iran

Abstract: Inflation lessens the purchasing power of money generally leading to reduction in demand for purchasing products. That is also why companies may increase advertising in order to alleviate the shock. This paper considers a new customer reaction to inflation growth, namely cautious behaviour, according to which customers react differently in the beginning phases of inflation which leads to an initial demand enhancement, though following a decreasing trend after the prices reach a sufficiently unaffordable level. On the other hand, inflation growth increases demand for leasing, which is a suitable option to satisfy needs of products that are to be used only in a specific duration. New exponential functions are designed for the competition between purchasing and leasing to find the revenue of an integrated finance lease-sales system. Sensitivity and trends of decision variables' optimal values are analysed in terms of caution coefficient and inflation vectors for different numerical examples.

Keywords: demand function; customer behaviour; high inflation; finite pricing; finance lease; mathematical modelling; revenue management; engineering economy; sensitivity analysis; competitive purchasing; leasing demand; joint inventory-pricing decisions; decision making; inventory modelling; pricing models.

DOI: 10.1504/IJMDM.2014.060862

International Journal of Management and Decision Making, 2014 Vol.13 No.2, pp.157 - 173

Available online: 01 May 2014 *

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