Dynamic vs static pricing in a make-to-stock queue with partially controlled production (Q2460075)

The authors consider the problem of jointly coordinating capacitated price and replenishment decisions in make-to-stock queue with partially controlled production. The framework of their model is inspired by \textit{L. Li} [Math. Oper. Res. 13, No. 3, 447--466 (1988; Zbl 0651.90040)]. The difference lies in the fact that, in addition to the controlled replenishment process, the authors assume that there is an uncontrolled flow of items arriving in the inventory, modelled by a Poisson process. In the dynamic pricing (DP) case, the authors extend the results of Li by showing that the optimal policy, in the sense of maximizing the average profit over an infinite horizon, is of base-stock type and the optimal prices are non-increasing in the stock level. In the static pricing (SP) case, they show that the optimal policy is also of base-stock type. A numerical study on the benefits of DP with respect to SP, carried out in the paper, shows that DP is potentially much more beneficial when the replenishment process is not totally controlled.