Joint optimization of dynamic pricing and lot-sizing decisions with nonlinear demands: Theoretical and computational analysis

Abstract

This paper addresses a capacitated lot-sizing problem with pricing decisions. The considered problem consists of planning the production of different products during several time periods with setup costs. Unlike the classical version of the capacitated lot sizing problem, the demand for the products is not fixed but price-sensitive in this problem. The demand function is assumed to be nonlinear. The decisions consist of establishing the best strategy for production and inventory, and the best price policy. We propose an improved mathematical formulation by extending some previous works using new lower and upper bounds to reduce the solution space. We also introduce new heuristic methods to provide near-optimal solutions. These methods are tested on several instances from previous studies. The obtained results illustrate the efficiency of these methods.