TECHNICAL NOTE---A Computational Approach for Optimal Joint Inventory-Pricing Control in an Infinite-Horizon Periodic-Review System

This note considers a joint inventory-pricing control problem in an infinite-horizon periodic-review system. Demand in a period is random and depends on the posted price. Besides the holding and shortage costs, the system incurs inventory-replenishment costs that consist of both variable and fixed components. At the beginning of each period, a joint inventory and pricing decision is made. Under the long-run average profit criterion, we show that an optimal policy exists within the class of so-called (s, S, p) policies. This is established based on our algorithmic development, which also results in an algorithm for finding an optimal (s, S, p) policy.