An EOQ model with stock and price sensitive demand |
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Institution: | 1. Graduate Institute of Transportation and Logistics, National ChiaYi University, 300 Shiue-Fu Road, ChiaYi 600, Taiwan;2. Department of Industrial Management, National Formosa University, Taiwan |
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Abstract: | Many business practices show that the presence of a larger quantity of goods displayed may attract more customers than that with a smaller quantity of goods. This phenomenon implies that the demand may have a positive correlative with stock level. Under such a circumstance, a firm should seriously consider its pricing and ordering strategy since the demand for their goods may be affected by their selling prices and inventory level. This paper aims to develop a continuous inventory model for finding the strategy for a firm that sells a seasonal item over a finite planning time. The purpose of this firm is to maximize its expected profit by determining the optimal ordering quantity and price setting/changing strategy. Some sufficient conditions are found for finding the optimal decision rules. |
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