A newsvendor problem with markup pricing in the presence of within-period price fluctuations
Type :
Article
Publication Status :
Published
Access :
restrictedAccess
Abstract
We consider a single-item single-period joint inventory management and pricing problem of a retailer selling an item that has selling price uncertainties. Unlike most of the literature on the newsvendor problem, we assume that price-dependent demand arrives randomly according to a stochastic arrival process whose rate depends on the fluctuating market input price process. The retailer's problem is to choose the order quantity and a proportional price markup over the input price to maximize the expected profit. This setting is mostly encountered by retailers that trade in different currencies or have to purchase and convert commodities for seasonal sales. For this setting, we characterize both the optimal inventory and markup levels. We present monotonicity properties of the expected profit function with respect to each decision variable. We also show that more volatile input price processes lead to lower expected profits.
Source :
European Journal of Operational Research
Date :
2022-08-16
Volume :
301
Issue :
1
Publisher :
Elsevier
URI
http://hdl.handle.net/10679/8420https://www.sciencedirect.com/science/article/pii/S0377221721008183
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