Multi-product budget-constrained acquisition and pricing with uncertain demand and supplier quantity discounts

Abstract

We consider the joint acquisition and pricing problem where the retailer sells multiple products with uncertain demands and the suppliers provide all unit quantity discounts. The problem is to determine the optimal acquisition quantities and selling prices so as to maximize the retailer’s expected profit, subject to a budget constraint. This is the first extension to consider supplier discounts in the constrained multi-product newsvendor pricing problem. We establish a mixed integer nonlinear programming (MINLP) model to formulate the problem, and develop a Lagrangian-based solution approach. Computational results for the test problems involving up to thousand products are reported, which show that the proposed approach can obtain high quality solutions in a very short time.