A Two-Level Trade-Credit Approach to an Integrated Price-Sensitive Inventory Model with Shortages

Abstract

This paper deals with an economic order quantity model with deterioration for two different demand functions under two-level of trade-credit policy. The demand functions of the proposed model are two types: (i) exponential function of the price (ii) price with the negative power of constant. Shortages are allowed and fully backlogged as deterioration arises. A nonlinear constraint optimization problem is then formulated considering cost and profit parameters. The main objective of this paper is to find out the optimal selling price, optimal deteriorating length and optimal cycle length for the optimal total profit of the chain. Some theoretical as well as numerical outcomes are studied to show the validity of the proposed model. A sensitivity analysis is carried out to study the effect of changes of key parameters of the inventory system.