This paper addresses the simultaneous determination of pricing and inventory replenishment strategies under a fluctuating environment.Specifically,we analyze the single item,periodic review model.The demand consists of two parts:the deterministic component,which is influenced by the price,and the stochastic component (perturbation).The distribution of the stochastic component is determined by the current state of an exogenous Markov chain.The price that is charged in any given period can be specified dynamically.A replenishment order may be placed at the beginning of some or all of the periods,and stockouts are fully backlogged.Ordering costs that are lower semicontinuous,and inventory/backlog (or surplus) costs that are continuous with polynomial growth.Finite-horizon and infinite-horizon problems are addressed.Existence of optimal policies is established.Furthermore,optimality of (s,S,p)-type policies is proved when the ordering cost consists of fixed and proportional cost components and the surplus cost (these costs are all state-dependent) is convex.
This research examines how to use an option contract to coordinate a retailer-led supply chain where the market information can be updated. Based on Stackelberg game theory, we build a mode with one supplier and one retailer in which the retailer designs contracts to coordinate the supplier’s production in a two-mode production environment. This focuses on an option contract that consists of two option prices and one exercise price. By theoretical analysis and numerical example, we find that such a contract can coordi-nate the supplier and retailer to act in the best interest of the channel. The optimal pricing conditions are given as follows: First, option prices should be negatively correlated to the exercise price and should be in a relevant range. Second, the first-period option price should be no greater than the second-period price and should be linearly correlated to the second-period option price when the latter is beyond some threshold. The results show that such option contracts can arbitrarily allocate the extra system profit between the two parties so that each party is in a win-win situation.
