Joint pricing and production control decisions for omni-channel BOPS retailers with stochastic reference price effects. (English) Zbl 1512.90120
Summary: This paper utilizes the consumers’ stochastic reference price to analyze an omni-channel retailer’s joint dynamic pricing and production management problem in which consumers can cancel their orders before payment and return the products after payment if the products don’t meet their expectation. The retailer’s optimal pricing and production rate are derived by maximizing the total expected profit under stochastic reference price effects over an infinite horizon in a continuous framework. The analysis shows that the optimal price and production rate are linear feedback form of the two state variables when production and inventory/shortage cost are strictly convex. Moreover, the sufficient conditions of stability and monotone convergence properties are derived for the expected steady state inventory and reference price. Finally, a set of sensitivity analysis is discussed to characterize the impacts of system parameters on the optimal decisions and some managerial insights are revealed.
MSC:
90B50 | Management decision making, including multiple objectives |
91B24 | Microeconomic theory (price theory and economic markets) |
90B05 | Inventory, storage, reservoirs |