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- Title
Joint dynamic pricing and investment strategy for perishable foods with price-quality dependent demand.
- Authors
Liu, Guowei; Zhang, Jianxiong; Tang, Wansheng
- Abstract
The food quality has always played an important role in the retail process since it has been considered as a direct factor to influence a consumer's purchase decision. In this paper, we formulate an inventory model for perishable foods, in which the demand depends on the price and quality that decays continuously. The objective is to determine a joint dynamic pricing and preservation technology investment strategy while maximizing the total profit from selling a given initial inventory of foods. We first prove the existence of an optimal solution based on Filippov-Cesari theorem. Then, we obtain all the candidates and provide the conditions that make a certain candidate be an optimal solution according to Pontryagin's maximum principle. Next, we present an effective algorithm to search for the optimal strategy. Finally, two numerical examples are employed to illustrate the solution procedure and the results, followed by sensitivity analysis and managerial insights.
- Subjects
TIME-based pricing; PERISHABLE foods; MAXIMUM principles (Mathematics); NONPROFIT sector; FOOD quality; SENSITIVITY analysis; PRICING
- Publication
Annals of Operations Research, 2015, Vol 226, Issue 1, p397
- ISSN
0254-5330
- Publication type
Article
- DOI
10.1007/s10479-014-1671-x