Order and exit decisions under non-increasing price curves for products with short life cycles

Frenk, Hans and Pehlivan, Canan and Sezer, Semih Onur (2019) Order and exit decisions under non-increasing price curves for products with short life cycles. Mathematical Methods of Operations Research, 90 (3). pp. 365-397. ISSN 1432-2994 (Print) 1432-5217 (Online)

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Abstract

We consider a supplier selling a product with a relatively short life cycle and following a non-increasing price curve. Because of the short cycle, there is a single procurement opportunity at the beginning of the cycle. The objective of the supplier is to determine the initial order quantity and the time to remove the product from the market in order to maximize her profits. We study this problem in a continuous-time framework where the demand is modeled with a non-homogeneous Poisson process having a general intensity function and the pricing strategy is given by an arbitrary non-increasing function. We give a rigorous mathematical analysis for the problem and show how it can be solved in two stages. We also consider the special case with piecewise constant intensity and price functions. For this case, we show that the optimal exit time is included in the set of break points of these functions. This brings a fast method to obtain the optimal solution for this special case.
Item Type: Article
Subjects: Q Science > QA Mathematics > QA273-280 Probabilities. Mathematical statistics
Divisions: Faculty of Engineering and Natural Sciences > Academic programs > Industrial Engineering
Faculty of Engineering and Natural Sciences > Basic Sciences > Mathematics
Faculty of Engineering and Natural Sciences
Depositing User: Semih Onur Sezer
Date Deposited: 06 Jan 2020 14:38
Last Modified: 26 Apr 2022 10:13
URI: https://research.sabanciuniv.edu/id/eprint/39591

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