Optimisation of pricing and ordering under the two-stage credit policy for deteriorating items when the end demand is price and credit period sensitive

Abstract

The supplier offers a credit period to the retailer for settling account against the purchases made. But this credit period is not passed by the retailer to the customer which is termed as one-stage credit policy. However, in business, the retailer offers credit period to his customers to stimulate their demand. Such a situation where both supplier as well as retailer offers the credit period to their respective customers is known as two-stage credit policy. In this research article, the demand of an item is assumed to be a function of credit period and sale price offered by the retailer to the customers. The units in inventory are subject to constant rate of deterioration. A flow-chart is given to decide the retailer's optimal decision policy. The results have been validated by a numerical example.