DECISION MAKING OF PRICING POLICIES IN GROWING MARKET FOR DETERIORATING ITEMS

Abstract

This paper studies the optimal pricing policy and optimal lot-sizing decision in growing market for deteriorating products. Pricing policy for growing market is entirely different than the decline market. Price reducing is the best strategy in decline market whereas price increasing may be the best-strategy in growing market. When a product is introduced in the market the demand of product increases slowly according to the performance of the product and depends on market conditions. In maturity stage, the demand is gradually increasing and thus it needs to obtain a pricing policy in growing market. This enables in deriving a new optimal lot-sizing and optimal price setting that maximizes the profit of the system. A numerical example presented to illustrate the proposed model and for practical use. The sensitivity analysis studied for key parameters and recommendations are made to be based on it.

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