Pricing and Order-Up-To Decisions for a Perishable Itemwith Price and Stock-Dependent Demand under LIFO Policy

10.6186/IJIMS.2011.22.4.4

Liang-Tu Chen；Jen-Ming Chen；Ben Wang

LIFO ； demand-side pricing ； order-up-to level ； infinite planning horizon ； deterioration

International Journal of Information and Management Sciences

22：4（2011 / 12 / 01）

377 - 394

英文

The study deals with an inventory system for perishable products that are subject to effects of constant deterioration and fixed lifetime, facing a price and stock-level dependent demand function, and under the last-in-first-out (LIFO) issuing policy. The model in the study is a generalized version of the previous research work by considering the price as a decision variable coupled with the deteriorating effect. The purpose of the model is to jointly determine the optimal selling price, order-up-to level, and inventory cycle over an infinite planning horizon so that the net profit per unit time is maximized. The problem is formulated as a constrained optimization model solved by a procedure incorporating Karush-Kuhn-Tucker (KKT) rule, secant search method and enumeration scheme. To demonstrate the applicability of the generalized model, a case study of greater amberjack for sliced raw fishes, i.e., so-called sashimi, at a local retail store is carried out. The study also shows that the demand-side pricing scheme is a more effective mechanism on profit-boosting than the supply-side inventory policy.

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1. Yu, Jonas C. P.,Wu, Chia-Hung,Chen, Jen-Ming(2014).Pricing Strategy for Product Reuse with Multiple Quality Levels and Price- and Availability-Dependent Demand.International Journal of Information and Management Sciences,25(1),51-66.