Pricing Strategy with Exponential Declining Demand Using Preservation Cost

Abstract

The inventory model of seasonal products is developed in which the deterioration controlled by investing some cost of item preservation technology. In diminishing market, price sensitiveness analyzed with an exponentially declining demand. The object is to optimize the total profit per unit time, optimal selling price, length of replenishment cycle and preservation technology investment. We have shown that there exist an optimal selling price, and length of replenishment cycle that maximize the total profit. Also, we have proved the total profit per unit time is a concave function of the preservation technology investment. Finally, the model is illustrated by numerical example and fallowed by sensitive analysis.

Keywords

• inventory
• exponentially declining demand
• preservation cost
• deterioration
• price
• replenishment cycle