Joint Optimal Pricing and Inventory Control for Deteriorating Items under Inflation and Customer Returns

Abstract

This paper studies the effect of inflation and customer returns on joint pricing and inventory control for deteriorating items. We adopt a price and time dependent demand function, also the customer returns are considered as a function of both price and demand. Shortage is allowed and partially backlogged. The main objective is determining the optimal selling price, the optimal replenishment cycles, and the order quantity simultaneously such that the present value of total profit in a finite time horizon is maximized. An algorithm has been presented to find the optimal solution. Finally, we solve a numerical example to illustrate the solution procedure and the algorithm.