AN OPTIMAL JOINT PRICING AND CAPACITY PLANNING STRATEGY FOR MULTIPLE PRODUCTS WITH SHORTAGE PENALTY AND BUDGET CONSTRAINT

摘要

This paper studies the problem of an optimal pricing and order quantity decision for a firm that faces produc-tion/purchase of multiple products under a budget constraint. A shortage penalty is assumed for not meeting themarket demand, and the demand is assumed price dependent stochastic. The problem is addressed using two ap-proaches, one assumes that the demand distribution is known, whereas, the other approach assumes that the demanddistribution is not known, however, the simple demand related parameters, mean and standard deviation are known.The problem is identified such that a unique control of integrated strategy of pricing and inventory can be exercisedto determine the global maximum profit when demand distribution is known. Whereas in the case of using distribu-tion free approach when demand distribution is not known, it is shown that a unique control of integrated strategy ofpricing and inventory allocation can also be exercised to determine the global maximum profit. Under this situation,this profit will be the maximum revenue while stochastic demand is replaced by its deterministic approximation usingdistribution free approach which guarantees the best revenue under worst possible demand.