Joint Pricing and Production Control Decisions for Omni-channel BOPS Retailers with Stochastic Reference Price Effects

10.6186/IJIMS.202303_34(1).0001

Hui-ming Xu；Yuan Li；Yu-mei Hou

Omni-channel ； Pricing-inventory management ； Consumer returns ； Consumer order cancellation ； Stochastic reference price effects

International Journal of Information and Management Sciences

34卷1期（2023 / 03 / 01）

1 - 22

英文

This paper utilizes the consumers' stochastic reference price to analyze an omni-channel retailer's joint dynamic pricing and production management problem in which consumers can cancel their orders before payment and return the products after payment if the products don't meet their expectation. The retailer's optimal pricing and production rate are derived by maximizing the total expected profit under stochastic reference price effects over an infinite horizon in a continuous framework. The analysis shows that the optimal price and production rate are linear feedback form of the two state variables when production and inventory/shortage cost are strictly convex. Moreover, the sufficient conditions of stability and monotone convergence properties are derived for the expected steady state inventory and reference price. Finally, a set of sensitivity analysis is discussed to characterize the impacts of system parameters on the optimal decisions and some managerial insights are revealed.

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