A generalized payment policy for deteriorating items when demand depends on price, stock, and advertisement under carbon tax regulations

Abstract

The down-cash-credit method is quite common in today’s real-world commercial transactions. In light of existing legislation to decrease carbon pollution, this research aims to investigate how down-cash-credit payments impact business strategies for perishable items in the context of the most commonly utilized carbon tax legislation. Specifically, this article demonstrates an inventory system from the buyer’s point of view in which (a) the demand curve is determined by the price, displayed volume, and frequency of advertisement, (b) the product is constantly deteriorating, (c) the supplier provides one of the frequently utilized down-cash-credit payment methods, and (d) the buyer gets taxed at a consistent rate for each ton of carbon emissions. Moreover, the goal of pharmaceutical stores is to optimize overall profit by simultaneously determining order cycle, price, and frequency of advertisements. Finally, the theoretical results are validated by solving two numerical illustrations and conducting a sensitivity analysis of the main factors resulting from the following managerial implications: (a) credit pay provides the minimum sales price, but the maximum profit margin of any financing method, (b) an increase in scale demand raises selling price and length of the cycle while increasing overall profit significantly.