Quotation Taudes, Alfred, Rudloff, Christian. 2012. Integrating Inventory Control and a Price Change in the Presence of Reference Price Effects - A Two-Period Model. Mathematical Methods of Operations Reserarch (formerly: Zeitschrift für Operations Research (ZOR)) 75 (1): 29-65.


BibTeX

Abstract

Demand and procurement planning for consumer electronics products must cope with short life cycles, limited replenishment opportunities and a willingness to pay that is influenced by past prices and decreases over time. We therefore propose the use of an integrated pricing and inventory control model with a two-period linear demand model, in which demand also depends on the difference between a price-history-based reference price and the current price. For this model we prove that the optimal joint pricing/inventory policy for the replenishment opportunity after the first period is a base-stock, list-price policy. That is, stock is either replenished up to a base-stock level and a list-price is charged, or it is not replenished and a discount is given that increases with the stock-level. Furthermore, we use real-world cell phone data to study the differences between an integrated policy and traditional sequential optimization, where prices are initially optimized based on the expected demand and ordering cost, and the resulting demand distribution is used to determine an optimal inventory policy. Finally, we discuss possible extensions of the model.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Mathematical Methods of Operations Research
Citation Index SCI
WU-Journal-Rating new FIN-A, INF-A, STRAT-B, WH-B
Language English
Title Integrating Inventory Control and a Price Change in the Presence of Reference Price Effects - A Two-Period Model
Volume 75
Number 1
Year 2012
Page from 29
Page to 65
Reviewed? Y
URL http://www.springerlink.com/content/j732462q01p31468/

Associations

Projects
Integrated Demand and Supply Chain Management
People
Taudes, Alfred (Details)
Rudloff, Christian (Former researcher)
Organization
Produktionsmanagement (Taudes) (Details)
Research Institute for Supply Chain Management FI (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
1121 Operations research (Details)
1145 Time series analysis (Details)
5310 Manufacturing (Details)
5316 Industrial management (Details)
5323 Econometrics (Details)
5326 Production research (Details)
5333 Business management (Details)
5347 Operations research (Details)
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