The Impact of Dynamic Pricing on Economic Order Decisions


Transchel, Sandra ; Minner, Stefan


URL: http://dx.doi.org/10.1016/j.ejor.2008.10.011
Document Type: Article
Year of publication: 2009
The title of a journal, publication series: European Journal of Operational Research : EJOR
Volume: 98
Issue number: 3
Page range: 773-789
Place of publication: Amsterdam [u.a.]
Publishing house: Elsevier
ISSN: 0377-2217
Publication language: English
Institution: Business School > ABWL u. Logistik (Minner -2008)
Subject: 330 Economics
Abstract: This paper analyzes the impact of dynamic pricing on the single product economic order decision of a monopolist retailer. Items are procured from an external supplier according to the economic order quantity (EOQ) model and are sold to customers on a single market without competition following the simple monopolist pricing problem. Coordinated decision making of optimal pricing and ordering is influenced by operating costs – including ordering and inventory holding costs – and the demand rate obtained from a price response function. The retailer is allowed to vary the selling price, either in a fixed number of discrete points in time or continuously. While constant and continuous pricing have received much attention in the literature, problems with a limited number of price changes are rather rare. This paper illustrates the benefit of dynamically changing prices to achieve operational efficiency in the EOQ model, that is to trigger high demand rates when inventories are high. We provide structural properties of the optimal time instants when the price should be changed. Taking into account costs for changes in price, it provides numerical guidance on number, timing, and size of price changes during an order cycle. Numerical examples show that the benefits of dynamic pricing in an EOQ framework can be achieved with only a few price changes and that products being unprofitable under static pricing may become profitable under dynamic pricing.

Dieser Eintrag ist Teil der Universitätsbibliographie.




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Transchel, Sandra ; Minner, Stefan (2009) The Impact of Dynamic Pricing on Economic Order Decisions. European Journal of Operational Research : EJOR Amsterdam [u.a.] 98 3 773-789 [Article]


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