Abstract
This paper examines the positive aspects of aging. Some items, such as valuable and rare stamps, old coins, works of art, and antiques, become more expensive over time. More popular examples demonstrating the positive effect of aging that influences price are the aging of boutique wine and artisan cheese. The present paper examines the wine aging process that brings about quality improvement. This process also leads to determining (i) optimal aging periods for different wines; (ii) optimal grape juice inventory allocations and prices for different wines; (iii) optimal quantities of different kinds of wine; and (iv) the time durations of wine production and consumption from each vintage. These aspects are considered in an environment in which the demand increases over time due to the aging and rarity of the product.
Highlights
The issue of optimal pricing and inventory policy for perishable products has been considered for decades
They extend the issue of the optimal dynamic pricing and ordering policy of perishable products under various scenarios
Since the different wine quality levels are affected positively by the duration of aging of the wine, the question is how the total time, T, of the vintage is allocated between the production time of the wine inventory aging process and the consumption time of the final goods
Summary
The issue of optimal pricing and inventory policy for perishable products has been considered for decades. Discuss the case of artisan cheese and determine how to utilize an economic model to achieve the highest net present value (NPV) and internal rate of return in these kinds of cheese production Another example of the positive effect of aging over time is in the aging of fine red wine. The example discussed in this paper considers the case of grapes that are first converted into wine, whose quality is improved by the aging process. Since the different wine quality levels are affected positively by the duration of aging of the wine, the question is how the total time, T, of the vintage is allocated between the production time of the wine inventory aging process and the consumption time of the final goods (fine red wines). In order to answer these questions, the present paper develops a model with several basic characteristics
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