Dynamic Revenue and Inventory Management Models
Author: Yifeng Liu
Publisher:
Published: 2014
Total Pages: 127
ISBN-13:
DOWNLOAD EBOOKEffective pricing and inventory controls are very important for the success of a company, especially in an environment with many uncertainties such as random demand and fluctuating cost. In this work, we first consider pure dynamic pricing. Indeed, we consider three cases: markup in which price can only go up, markdown in which price can only go down, and reversible pricing in which price can go either direction. We also consider a joint pricing and inventory control model in which the raw material price evolves as a Markov process. For this model, we suppose production is make-to-order, so that the conversion from raw material to finished product is carried out only when demand arrives. For the pure pricing model, we establish the optimality of threshold-like policies. We also develop efficient and numerically stable algorithms. For the make-to-order joint inventory-pricing model, we demonstrate the optimality of a base-stock-list-price policy. In addition, we identify conditions under which policy parameters would exhibit monotone trends. Moreover, we showed the significant benefit of adopting cost-dependent base-stock list-price policy.