Pricing strategies for a non-replenishable item under variable demand and inflation |
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| Institution: | 1. School of Economics and Management, Beihang University, Beijing 100191, China;2. Beijing International Science and Technology Cooperation Base for City Safety Operation and Emergency Support, Beijing 100091, China;3. NUS Business School and The Logistics Institute-Asia Pacific, National University of Singapore, Singapore 119263, Singapore;1. Energy Technology, School of Business, Society and Energy, Mälardalens University, 72123 Västerås, Sweden;2. Institute of Thermal Science and Technology, Shandong University, Jinan, China;3. Academy of Chinese Energy Strategy, China University of Petroleum, Beijing, China;1. Department of Environmental and Business Economics, University of Southern Denmark, Niels Bohrs Vej 9, DK-6700 Esbjerg, Denmark;2. School of Resource and Environmental Management, Simon Fraser University, 8888 University Drive, Burnaby, British Columbia, Canada |
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| Abstract: | In this paper a model is developed for the pricing of non-replenishable inventory. Pricing strategies are examined that determine the minimum special price for immediate disposal of the entire stock. These are assessed using the return from inventory, net of holding costs, available for financing overheads and profits. Previous studies 2] and 3] have presented models for pricing the immediate disposal case. These have assessed the strategy on the basis of the lump sum generated at the end of a certain period. Their results gave, in many instances, very low special prices. This paper's result do not support their contentions in most instances. Indeed for many practical situations a special price of at least 80% of normal price is required. Substantially lower special prices are only justified when declining demand causes units of inventory to be sold at scrap value. |
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