Price Discount Determination in Pricing and Inventory Control of Perishable Good with Time and Price Demand

Document Type: Research Paper

Authors

Department of Industrial Engineering, Technology Development Institute (ACECR), Tehran, Iran

Abstract

Determining appropriate inventory control policies and product price are important aspects in the competitive markets of perishable products. Customers’ willing to pay for perishable product is declining when approaching to the end of product’s expiry date. In this paper, we consider price discount in pricing model as an alternative approach to influence on consumers’ purchase decision. The model determines the optimal values of selling price, discount time and replenishment schedule simultaneously such that the total profit is maximized. However, because of demand increase during the discount interval, different demand rate function which is a function of price and time is used in the model. In this regard, at first, we model the problem without regarding discount that its solution shows an impossible result in reality which the replenishment time is very short. But then with regarding discount in the model, more products are sold and thus the profit increases. Finally, we solve two numerical examples used an iterative algorithm by performing a sensitivity analysis of the model parameters and also discuss about specific managerial insights.

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