Dynamic Pricing and Ordering Policy for Non-Instantaneous Deteriorating Items

In this paper, dynamic pricing and ordering policy for non-instantaneous deteriorating items is developed. Shortage is allowed and partially backlogged where as the backlogging rate is variable and dependent on the waiting time for the next replenishment. The major objective is to determine the optimal selling price and the optimal ordering policy simultaneously such that, the total profit is maximized. We first show that for any given selling price, optimal ordering policy schedule exists and unique. Then, we show that the total profit is a concave function of price. Next, we present a simple algorithm to find the optimal solution. Finally, we solve a numerical example to illustrate the solution procedure and the algorithm.

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