# Dynamic pricing policies for an inventory model with random windows of opportunities

Abstract: We study a single-product fluid-inventory model in which the procurement price of the product fluctuates according to a continuous time Markov chain. We assume that a fixed order price, in addition to state-dependent holding costs are incurred, and that the depletion rate of inventory is determined by the sell price of the product. Hence, at any time the controller has to simultaneously decide on the selling price of the product and whether to order or not, taking into account the current procurement price and the inventory level. In particular, the controller is faced with the question of how to best exploit the random time windows in which the procurement price is low. We consider two policies, derive the associated steady-state distributions and cost functionals, and apply those cost functionals to study the two policies.© 2017 Wiley Periodicals, Inc. Naval Research Logistics, 2017

...read more

##### Citations

1 citations

##### References

1,673 citations

### "Dynamic pricing policies for an inv..." refers methods in this paper

...Since the expensive period is exponentially distributed with rate λ, it follows by the well-known PASTA (Poisson Arrivals See Time Average [33]) property that if C1(τ−) > 0, then C1(τ−) and C1 are equal in distribution, and the rate at which level x is upcrossed is λ....

[...]

1,427 citations

### "Dynamic pricing policies for an inv..." refers background in this paper

...In practice, that probability, and thus the response function, are not known in complete certainty, although they can typically be evaluated via past demand data; see [17] and the reference therein....

[...]

1,379 citations

962 citations

### "Dynamic pricing policies for an inv..." refers background in this paper

...Starting with the seminal work of Naor [26], a standard assumption in the economic analysis of queues is that customers’ arrival rate to a service system is completely determined by the price and expected reward of joining the system to get served....

[...]

...Price-Regulated Demand Starting with the seminal work of Naor [26], a standard assumption in the economic analysis of queues is that customers’ arrival rate to a service system is completely determined by the price and expected reward of joining the system to get served....

[...]

881 citations

### "Dynamic pricing policies for an inv..." refers methods in this paper

...Since our model has nonincreasing sample paths between jumps, it must exhibit a deterministic motion between jump epochs, so that it is a piecewise-deterministic Markov process, as in [15]....

[...]

##### Related Papers (5)

[...]