Pricing and Inventory Control for a Perishable Product

• Main Authors: LI, Yanzhi, LIM, Andrew, RODRIGUES, Brian
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2009
• Subjects: perishable; pricing and inventory control; Operations and Supply Chain Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1820; https://doi.org/10.1287/msom.1080.0238
• Institution: Singapore Management University

In this note, we study the concurrent determination of pricing and inventory replenishment decisions for a perishable product in an infinite horizon. Demands in consecutive periods are independent and influenced by prices charged in each period. In particular, we treat price as a decision variable to maximize the total discounted profit. We analyze the optimal solution-structure of a two-period lifetime problem and from insights gained in numerical experiments, develop a base-stock/list-price heuristic policy for products with arbitrary fixed lifetimes. Experiments show this policy to be effective.