Joint optimal dynamic pricing and capacitated lot sizing problem with perishable inventory

Material requirements planning research has typically assumed that the firm's demands are determined prior to order planning. In contrast, a class of capacitated lot sizing problems is considered, which implicitly decides, through pricing decisions, the demand levels the firm should satisfy in order to maximize contribution to profit. An algorithm based on dynamic programming is proposed, by which the optimal pricing strategy and the optimal order strategy are obtained in polynomial time. The results show that the algorithm can effectively solve the original problem. Also, in comparison with the decentralized policy, the more rational prices can be set so as to maximize the form's profit by the joint policy. Sensitivity analysis of order capacity shows the effect of capacity on profit and pricing, by which the proper order capacity level can be set. Sensitivity analysis of life perishability shows the remarkable effect of life perishbility on order strategy.