An EOQ model for perishable item with stock and price dependent demand rate (Q975801)

Summary: This paper deals with a single-item economic order quantity model where the vendor is in a position to influence demand of customers by its stock display and pricing decision. In general, most of the merchandise have a certain life time after which deterioration starts. In this situation, a good management decides to boost the sales of their products at reduced price to avoid more losses due to deterioration. Consequently, the demand of deteriorating items is an increasing function of reduction rate on selling price. It is thus confronted with simultaneous reduction on selling price and replenishment quantity decisions, which would jointly maximise the expected average profit over an infinite planning horizon. Computational aspects of the proposed model are discussed, and formulation is shown to give successful results on test problems. The sensitivity of the optimal solution to changes in the values of different parameters is also examined.