Multi-period dynamic pricing model for deteriorating products in a supply chain with preservation technology investment and carbon emission

Abstract

In this study, a multi-period dynamic pricing model in a two-echelon supply chain consisting of a retailer and a manufacturer is developed for a deteriorating product with a fixed shelf life. The demand at the retailer in each period is considered to be a function of the retail price, inventory on stock, reference price, and product freshness. Preservation technology investment (PTI) is considered to retard the rate of deterioration with carbon emission to keep the process green. Centralised and decentralised models are developed considering dynamic pricing for the retailer and static pricing for the manufacturer with a variable replenishment cycle length. Algorithms have been developed to obtain the optimal replenishment cycle length, retailer’s end of inventory level, retail price, PTI and discounted total profit for the retailer/manufacturer/supply chain. We study the generated trade-off between PTI, benefits of reduced deterioration rate and cost of carbon emission. The numerical studies suggest that supply chain profit can be greatly improved with efficient PTI and dynamic pricing policy. We also find that the initial reference price plays a key role in improving the profit.