An inventory model for coordinating ordering, pricing and advertisement policy for an advance sales system

Abstract

In this paper we study a coordinated stock replenishment, pricing, and advertisement problem for an inventory with advance booking system. A single period planning horizon is considered, consisting of both advance sales and spot sales periods. The discount is offered to the customers for booking the product in advance when the replenishment arrives. The product demand is price and advertising expenditure sensitive. This paper aims to find the optimal ordering quantity, selling price, and advertising expenditure of the product, which maximizes the total profit. The solution algorithm is suggested for computing the optimal solution, which is illustrated numerically.

Keywords

• joint decision
• inventory-pricing
• inventory-advertisement
• advance sales
• discount
• advertisement