Volume 53, Number 3, April-June 2019
|Page(s)||731 - 747|
|Published online||14 June 2019|
Optimal dynamic pricing, preservation technology investment and periodic ordering policies for agricultural products
College of Management and Economics, Tianjin University, 300072 Tianjin, China
2 Business School, Hunan University, 410082 Changsha, China
* Corresponding author: firstname.lastname@example.org
Accepted: 30 May 2018
This paper focuses on the inventory management of agricultural products, a specific type of perishable items carrying the deterioration property. In practice, the deterioration rate of agricultural products is varying with time and can be slowed down via investing in the preservation technology. This objective of this paper is to maximize the firm’s total profit per unit time by simultaneously determining dynamic pricing, replenishment cycle length, replenishment quantity and preservation technology investment. We first derive pricing policy by solving a dynamic optimization problem and then propose a solution procedure to obtain the optimal strategies that maximize profit. Furthermore, numerical examples and sensitivity analysis are conducted to gain more managerial insights. We find that the firm should take a penetration pricing policy. In addition, if the shelf life of products is very long, the firm should not take preservation technology investment. When the unit holding cost is relatively small or the unit purchasing cost is relatively large, the firm should increase preservation technology investment.
Mathematics Subject Classification: 90B05 / 49J15
Key words: Agricultural products / time-varying deterioration rate / dynamic pricing / preservation technology investment / periodic ordering
© EDP Sciences, ROADEF, SMAI 2019
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