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Joint inventory and pricing decisions for perishable products with two-period lifetime. (English) Zbl 1410.90006
Summary: We consider a periodic review model over a finite horizon for a perishable product with fixed lifetime equal to two review periods. The excess demand in a period is backlogged. The optimal replenishment and demand management (using price) decisions for such a product depend on the relative order of consumption of fresh and old units. We obtain insights on the structure of these decisions when the order of consumption is first-in, first-out and last-in, first-out. For the FIFO system, we also obtain bounds on both the optimal replenishment quantity as well as expected demand. We compare the FIFO system to two widely analyzed inventory systems that correspond to nonperishable and one-period lifetime products to understand if demand management would modify our understanding of the relationship among the three systems. In a counterintuitive result, we find that it is more likely that bigger orders are placed in the FIFO system than for a nonperishable product when demand is managed.

90B05 Inventory, storage, reservoirs
91B24 Microeconomic theory (price theory and economic markets)
90C39 Dynamic programming
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