OPTIMAL ORDERING RULE FOR A PERISHABLE PRODUCT WITH A DYNAMIC PRICING POLICY

Abstract This paper considers the problem of determining the optimal ordering quantity for a perishable product to be sold over a nite sales horizon with a dynamic pricing policy. To date, most models developed to study a dynamic pricing policy for perishable products assume that the salvage value is nonnegative. In this model we allow the salvage value to be either a nonnegative or negative value. We derive the conditions under which the optimal ordering quantity takes either a zero value or nite value greater than zero. Moreover, we demonstrate the existence of a shortest sales horizon under a condition for which ordering of the product is protable if the seller's planned sales horizon is longer than the shortest sales horizon