Technical note - on the structure of joint inventory-pricing control with leadtimes

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Original languageEnglish
Pages (from-to)581-587
Journal / PublicationOperations Research
Issue number3
Publication statusPublished - May 2012


We consider a joint inventory-pricing control problem for a periodic-review, single-stage inventory system with a positive order leadtime and a linear order cost. Demands in consecutive periods are independent, but their distributions depend on the price in accordance with a stochastic demand function of additive form. Pricing and ordering decisions are made simultaneously at the beginning of each period. The objective is to maximize the total expected discounted profit over a finite horizon. We partially characterize the structure of the optimal joint ordering and pricing policies. We also show that our structural analysis can be extended to a multistage (or serial) inventory system with constant or stochastic leadtimes and an assemble-to-order system with price-sensitive demand.

Research Area(s)

  • inventory control, dynamic pricing, lead times, L♮-concavity

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