(s, S) Optimality in Joint Inventory-Pricing Control: An Alternate Approach

Operations Research · 2008 · Volume 56 · Issue 3

Abstract

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.

Keywords

inventory/production, uncertainty, stochastic, marketing, pricing, advertising

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