Optimum pricing decision for the retailer with warranty and price-dependent variable demand

¹ Department of Applied Sciences, Faculty of Engineering and Technology, Parul University, Vadodara 391760, Gujarat, India
² Parul Institute of Applied Sciences, Faculty of Applied Sciences, Parul University, Vadodara 391760, Gujarat, India
³ Government Polytechnic Dahod, Dahod 389151, Gujarat, India
⁴ Department of Industrial Engineering, Yonsei University, 50 Yonsei-ro, Sinchon-dong, Seodaemun-gu, Seoul 03722, South Korea
⁵ Department of Mathematics, Lovely Professional University, Phagwara, Punjab 144411, India
⁶ Center for Global Health Research, Saveetha Institute of Medical and Technical Sciences, Saveetha University, Chennai, Tamil Nadu 600077, India
⁷ Department of Hospitality and Tourism Management, Sejong University, 209 Neungdong-ro (Gunja-dong), Gwangjin-gu, Seoul 05006, South Korea

^* Corresponding author: bsbiswajitsarkar@gmail.com

Received: 18 March 2024
Accepted: 6 December 2024

Abstract

Buying inventory on a credit basis is an effective pricing plan, and trade credit is a popular component of market transactions that increase demand. In a dynamic situation, most businesses offer different rewards and services to their consumers under certain terms and conditions during commodity sales. The accompanying companies provide a warranty period facility to increase consumer demand for products. The holding cost often increases over time. This study determines a production model wherein the production rate is proportionate to the price-warranty period based on the demand rate with time- dependent holding cost and trade credit policy. This work leads to three vital conventions: (I) the rate of product demand is considered to be price-warranty period dependent; (II) the non-linear function is considered for the rate of replacement failure, wherein the capital of the manufacturer depends on the warranty period; and (III) the rate of inflation is constant; moreover, the present time value of money measured. This study aims to find the selling price, cycle time, and warranty period by using an algorithm to maximize the total profit function of the manufacturer. The results are validated by solving three numerical examples with their graphical representation based on different situations and the major parameters, and sensitivity analysis is analyzed with important decision-making implications.