Title: Revenue and turn-over based joint pricing and production planning for an integrated financial lease-sales system: a new mathematical model

Authors: Sina Keyhanian; Masoud Rabbani

Addresses: UTIMSE, College of Engineering, University of Tehran, North Amirabad Street, Tehran, Iran; Department of Industrial Engineering, College of Engineering, University of Tehran, 16th of Azar Street, Enghelab Ave., P.O. Box 11155-4563, Tehran, Iran ' Department of Industrial Engineering, College of Engineering, University of Tehran, 16th of Azar Street, Enghelab Ave., P.O. Box 11155-4563, Tehran, Iran

Abstract: Nowadays, leasing is turning into a growing alternative to satisfy needs of durable products. This paper aims to analyse the inflation-brought competition between sales and leasing, by designing a bi-objective mathematical model. Two sets of price and inflation-sensitive joint demand functions are introduced for customers' purchasing and leasing demand. Purchase rebates or bargaining on leased product's initial value are employed on manufacturer's suggested retail price (MSRP), to attract customer's view on both purchasing price and monthly lease payments respectively. Two models are defined; one for pricing and inventory decisions, another for lease-contracts' assignment plan. The objectives are to maximise revenue and whole lease turn-overs. The MINLP model's objectives are gathered into one by using Minkowsky distance-based L_p-metrics and solved by generalised reduced gradient (GRG) algorithm. The numerical analysis implies that optimality of the objectives are dependent to each other when brought in a bi-objective optimisation manner.

Keywords: pricing; revenue management; purchase rebates; bargaining; production planning; inventory decisions; sales; leasing; lease turnover; inflation-sensitive demands; bi-objective optimisation; mathematical modelling; leased products; purchasing price; monthly lease payments; generalised reduced gradient; GRG.

DOI: 10.1504/IJOR.2015.068285

International Journal of Operational Research, 2015 Vol.22 No.3, pp.310 - 341

Received: 23 Dec 2012
Accepted: 14 Jul 2013
Published online: 09 May 2015 *

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