Optimal pricing and inventory strategies for fashion products under time-dependent interest rate and demand
Type :
Article
Publication Status :
Published
Access :
restrictedAccess
Abstract
In this work we consider the dynamic pricing problem of a retailer operating in a market with a single fashion item and under time-dependent interest rate. The demand is assumed to be deterministic and dependent on the price and decay with time, i.e., the market shrinks throughout the horizon. Using an optimal-control-theoretic approach, we analytically derive the optimal pricing and inventory strategy for the retailer over a finite horizon setting. We further analyze the ramifications of the optimal pricing decision for different initial inventory levels dictated by the relationship between the supplier and the retailer; and for varying market interest rates. Optimal dynamic pricing policy is a continuous function, which is almost impossible to use in practice. This is handled using approximate piece-wise constant pricing policies. The trade-off between dynamic pricing policy and approximate policies is also investigated.
Source :
Computers and Industrial Engineering
Date :
2021-04
Volume :
154
Publisher :
Elsevier
URI
http://hdl.handle.net/10679/8102https://www.sciencedirect.com/science/article/pii/S036083522100053X
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