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, Volume 19, Issue 1, pp 177–188

Integrated inventory model with quantity discount and price-sensitive demand

Original Paper

Abstract

Quantity discount has been a subject of study for a long time; however, little is known about its effect on integrated inventory models when price-sensitive demand is placed. The objective of this study is to find the optimal pricing and ordering strategies for an integrated inventory system when a quantity discount policy is applied. The pricing strategy discussed here is one in which the vendor offers a quantity discount to the buyer. Then, the buyer will adjust his retail price based on the purchasing cost, which will influence the customer demand as a result. Consequently, an integrated inventory model is established to find the optimal solutions for order quantity, retail price, and the number of shipments from vendor to buyer in one production run, so that the joint total profit incurred has the maximum value. Also, numerical examples and a sensitivity analysis are given to illustrate the results of the model.

Integrated model Quantity discount Markup rate Price-sensitive demand 

Mathematics Subject Classification (2000)

90B05 

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Copyright information

© Sociedad de Estadística e Investigación Operativa 2009

Authors and Affiliations

  1. 1.General Education CenterSt. John’s UniversityTaipei HsienTaiwan
  2. 2.Graduate School of ManagementMing Chuan UniversityTaipeiTaiwan

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