A stochastic inventory model with price quotation

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This article studies a single-item periodic-review inventory problem with stochastic demand, uncertain price, and price search cost. At the beginning of a period, an inventory manager has to decide, considering the current inventory level, whether a price should be searched for at a non-zero cost. Once the price is known, she will have to decide the order size. For tractability the number of realizable prices is limited to two and (r, S-1, S-2)-type policies are considered, where r is the threshold for the price search decision and S-i is the order-up-to level for price p(i) for i = 1, 2. Although the problem is significantly simplified, it still allows for price speculations by the inventory manager; i.e., she requests a quote but may not buy. The properties of long-run average costs are studies and optimization algorithms are presented. Numerical studies show the effectiveness of the proposed policy compared with classic (s, S)-type policy and its natural three-parameter extension.
Publisher
TAYLOR & FRANCIS INC
Issue Date
2015-08
Language
English
Article Type
Article
Keywords

DISCOUNT OPPORTUNITIES; S POLICIES; SYSTEMS; SEARCH; REPLENISHMENT; OFFERINGS

Citation

IIE TRANSACTIONS, v.47, no.8, pp.851 - 864

ISSN
0740-817X
DOI
10.1080/0740817X.2014.955598
URI
http://hdl.handle.net/10203/199029
Appears in Collection
IE-Journal Papers(저널논문)
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