Abstract
The problem of determining the optimal selling price and lot size for an inventory system with non-instantaneous deteriorating item is considered in this chapter. In order to provide general framework, the pricing and lot sizing problem is modeled assuming a general price and time dependent demand function. The model allows for backlogging of demand which is characterized by decreasing function of waiting time. As the problem involves revenue and costs, a natural objective function for the model is profit per period. First, the sub problem in which price is fixed is solved to determine the optimal inventory policy. To broaden the problem, a procedure is developed for obtaining the optimal selling price and order size. To investigate the characteristics of the proposed model, numerical illustrations are presented.
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