Determining Optimal Selling Price, Order Size and the Number of Price Changes with Weibull Distribution Deterioration

Abstract

An inventory model for a deteriorating item with price sensitive demand is developed under deterioration rate, which is assumed to follow weibull distribution with known parameter. In addition, we allow for multiple price changes about an item, but the number of price changes isn’t given. The purpose of this paper is to find the optimal number of price settings, the optimal dynamic prices and the order quantity that maximizes profits for firm. A solution procedure is found to determine the optimal decisions.