Supplier's discount policy with a single price break point

Abstract

In this paper, the problem of designing an optimal quantity-discount schedule is analyzed from the perspective of the supplier. All-unit discount system and single price break point are assumed. We investigate the cases where both the discount rate and the price break point are unknown and either one of them is prescribed. An algorithm is developed which maximizes the supplier's economic gain with no additional cost to the customers. To illustrate the algorithm, a numerical example is solved.