A polynomial time algorithm for a deterministic joint pricing and inventory model
European Journal of Operational ResearchPublished 21 September 2004Open access
Wilco van den Heuvel, Albert Wagelmans
Citations43
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TL;DR
This paper derives an exact algorithm to determine the optimal price and lot-sizing decisions in the uncapacitated economic lot-size model, where demand is a deterministic function of price.
Abstract
In this paper we consider the uncapacitated economic lot-size model, where demand is a\ndeterministic function of price. In the model a single price need to be set for all periods. The\nobjective is to find an optimal price and ordering decisions simultaneously. In 1973 Kunreuther and Schrage proposed an heuristic algorithm to solve this problem. The contribution of our paper is twofold. First, we derive an exact algorithm to determine the optimal price and lot-sizing decisions. Moreover, we show that our algorithm boils down to solving a number of lot-sizing problems that is quadratic in the number of periods, i.e., the problem can be solved in polynomial time.
Keywords
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