Volume 2 Issue 3 pp. 523-532 Summer, 2011


Optimal ordering and pricing policy for price sensitive stock–dependent demand under progressive payment scheme


Nita H. Shah, Amisha R. Patel and Kuo-Ren Lou


The terminal condition of inventory level to be zero at the end of the cycle time adopted by Soni and Shah (2008, 2009) is not viable when demand is stock-dependent. To rectify this assumption, we extend their model for (1) an ending – inventory to be non-zero; (2) limited floor space; (3) a profit maximization model; (4) selling price to be a decision variable, and (5) units in inventory deteriorate at a constant rate. The algorithm is developed to search for the optimal decision policy. The working of the proposed model is supported with a numerical example. Sensitivity analysis is carried out to investigate critical parameters.


DOI: 10.5267/j.ijiec.2011.03.005

Keywords: Inventory, Deterioration, Marketing decision, Inventory level dependent demand rate, Partially backlogged shortage, Non-linear programming
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