A trade discount model for a single, non-seasonal product

• Main Authors: Cabangon, Myla M., San Pedro, Shirley F., Wong, Eileen S.
• Format: text
• Language: English
• Published: Animo Repository 1997
• Subjects: Mathematical models; Inventory control; Discount; Stochastic processes; System analysis
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/8307
• Institution: De La Salle University

The study considers a system where a seller, particularly a supermarket owner, is concerned with the optimal price discount rate to be offered on an optimal duration. This is essential to the seller for the main reason of maximizing his total profit given the varying demand trends for a particular product. The price cuts being referred to cover only the non-seasonal consumer type of goods. In this paper, a single product of this kind is carried throughout the analysis. The system considers deterministic demand of the product. Since the rate and duration of discounts will dictate demand itself, the study made use of different line equations representing the different possible demand trends. For each trend, different optimal values are yielded, providing the seller, essential information in discounting decisions. The numerical example involves the various selling parameters like holding costs, selling price, etc. Integrating these to the mathematical model, the problem is formulated as an unconstrained optimization problem where equations are partially differentiated with respect to the decision variables. Linearization is then applied yielding two equations and two unknowns that are solved simultaneously. The values of the decision variables, which are the optimal discount rate and duration, are then obtained. In this chapter, the model is going to be tested in various demand trends represented by simple equations of a line.