Optimal pricing and ordering strategy for non-instantaneous deteriorating items with price and stock sensitive demand and capacity constraint

One of the main and influential factors in marketing and selling is the selling price of products. Any change in this factor will have a significant impact on the company's revenue and profits. This paper presents a mathematic model for replenishment and pricing policy for non-instantaneous deteriorating items. Demand is assumed to be affected by price and inventory level and It is also assumed that the storage space is limited to make the model more realistic. In the presented model changing the price during the inventory period, causes more flexibility in the model pricing and increases the total profit. In the following, an algorithm has been developed to solve the proposed model and the implementation of the algorithm is illustrated by a numerical example. Finally, sensitivity analysis is presented and some managerial insights are provided.

Automated summary

The selling price of products is a major and influential factor in marketing and selling, with any change having a significant impact on a company's revenue and profits. This paper presents a mathematical model for replenishment and pricing policy, taking into account the impact of price and inventory level on demand, as well as limited storage space. Changing the price during the inventory period in the model allows for greater flexibility in pricing and leads to increased total profit.