Optimal dynamic pricing, preservation technology investment and periodic ordering policies for agricultural products

Lu, Jing; Zhang, Jianxiong; Jia, Xinyun; Zhu, Guowei

RAIRO - Operations Research - Recherche Opérationnelle, Tome 53 (2019) no. 3, pp. 731-747.

Suite au passage du modèle économique de la revue en S20, le texte intégral des articles des années 2019 et 2020 est accessible uniquement sur le site de l'éditeur et est réservé aux abonnés.

This paper focuses on the inventory management of agricultural products, a specific type of perishable items carrying the deterioration property. In practice, the deterioration rate of agricultural products is varying with time and can be slowed down via investing in the preservation technology. This objective of this paper is to maximize the firm’s total profit per unit time by simultaneously determining dynamic pricing, replenishment cycle length, replenishment quantity and preservation technology investment. We first derive pricing policy by solving a dynamic optimization problem and then propose a solution procedure to obtain the optimal strategies that maximize profit. Furthermore, numerical examples and sensitivity analysis are conducted to gain more managerial insights. We find that the firm should take a penetration pricing policy. In addition, if the shelf life of products is very long, the firm should not take preservation technology investment. When the unit holding cost is relatively small or the unit purchasing cost is relatively large, the firm should increase preservation technology investment.

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