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Optimal policies under different pricing strategies in a production system with Markov-modulated demand. (English) Zbl 1231.90049
Ceragioli, F. (ed.) et al., System modeling and optimization. Proceedings of the 22nd IFIP TC7 conference, July 18–22, 2005, Turin, Italy. New York, NY: Springer (ISBN 0-387-32774-6/hbk). IFIP, International Federation for Information Processing 199, 239-249 (2006).
Summary: We study the effects of different pricing strategies available to a continuous review inventory system with capacitated supply, which operates in a fluctuating environment. The system has a single server with exponential processing time. The inventory holding cost is nondecreasing and convex in the inventory level, the production cost is linear with no set-up cost. The potential customer demand is generated by a Markov-modulated (environment-dependent) Poisson process, while the actual demand rate depends on the offerred price. For such systems, there are three possible pricing strategies: static pricing, where only one price is used at all times, environment-dependent pricing, where the price changes with the environment, and dynamic pricing, where price depends on both the current environment and the stock level. The objective is to find an optimal replenishment policy under each of these strategies. This paper presents some structural properties of optimal replenishment policies, and a numerical study which compares the performances of these three pricing strategies.
For the entire collection see [Zbl 1118.93004].

MSC:
90B05 Inventory, storage, reservoirs
91B24 Microeconomic theory (price theory and economic markets)
90C40 Markov and semi-Markov decision processes
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