Technical Note—Price and Production Decisions with Random Demand
- 1 June 1974
- journal article
- Published by Institute for Operations Research and the Management Sciences (INFORMS) in Operations Research
- Vol. 22 (3) , 513-518
- https://doi.org/10.1287/opre.22.3.513
Abstract
This note studies the problem of setting price and production levels simultaneously in a series of N periods, where price is a parameter in the probability distribution of demand. It develops a simple policy characterized by two stock levels and an optimal price line in the price-inventory plane, gives an algorithm to compute such a policy and check conditions for its optimality, and presents a counterexample to the simple policy, using a small set of allowable prices, along with a discussion of both the counterexample and some characteristics of the model.Keywords
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