The effectiveness of a simple policy for coordinating inventory control and pricing strategies

We investigate the effectiveness of an (s, S, p) policy relative to an (s, S, A, p) policy in a single product, periodic review, finite horizon model with stochastic multiplicative demand and fixed ordering cost, in which an (s, S, A, p) policy is optimal. An extensive numerical study shows that empirically an (s, S, p) policy is highly effective relative to an (s, S, A, p) policy. We also formulate two alternative benchmark policies and find that the (s, S, p) policy is superior in terms of profit. In addition, we propose an efficient algorithm with simulated annealing and modified binary search to determine the (s, S, p) policy for the model.

Department dc:contributor.department

Massachusetts Institute of Technology. Computation for Design and Optimization Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2010

Author dc:creator

• Sun, Zhibo, S.M. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• David Simchi-Levi.

• Computation for Design and Optimization Program.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/61900

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/61900