Optimal ordering and pricing policy with supplier quantity discounts and price-dependent stochastic demand

We study a joint ordering and pricing problem for a retailer whose supplier provides all-unit quantity discount for the product. Both generalized disjunctive programming model and mixed integer nonlinear programming model are presented to formulate the problem. Some properties of the problem are analysed, based on which a solution algorithm is developed. Two numerical examples are presented to illustrate the problem, which are solved by our solution algorithm. Managerial analysis indicates that supplier quantity discount has much influence on the ordering and pricing policy of the retailer and more profit can be obtained when the supplier provides quantity discount. © 2012 Taylor and Francis Group, LLC.