\((s, S)\) optimality in joint inventory-pricing control: An alternate approach. (English) Zbl 1167.90332

Summary: We study a stationary, single-stage inventory system, under periodic review, with fixed ordering costs and multiple sales levers (such as pricing, advertising, etc.). We show the optimality of \((s, S)\)-type policies in these settings under both the backordering and lost-sales assumptions. Our analysis is constructive and is based on a condition that we identify as being key to proving the \((s, S)\) structure. This condition is entirely based on the single-period profit function and the demand model. Our optimality results complement the existing results in this area.


90B05 Inventory, storage, reservoirs
90C39 Dynamic programming
Full Text: DOI Link