2010- Working Papers:Operations Research and Decisions

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Optimal pricing and replenishment policy in a market with two types of customers who hold inventory, 34 pp.
S. Anily and R. Hassin
(Working Paper No. 4/2010)

We consider a pricing and replenishment model in which the retailer advertises the selling periods of the product at the beginning of the time horizon. The customers differ in their reservation price and the time they most need the product. The customers are assumed to be discretionary, meaning that if at their most desired time the product is out of stock then they may decide to buy it earlier or later than that time, paying a holding or shortage cost, respectively, or they may decide to quit. Such a modeling of the customers' behavior induces a partial backlogging system in which the retailer is exempted from the burden of having to estimate his/her backlogging or lost-sales cost parameters. We investigate the retailer's optimal policy for two types of customers, each associated with its own arrival rate and reservation price.


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