Maximizing Revenues of Perishable Assets with a Risk Factor
Operations Research · 1999 · Volume 47 · Issue 2
Abstract
This article presents a risk-sensitive pricing model to maximize sales revenue of perishable commodities with fixed capacity and finite sales horizon. The model assumes a pair of predetermined prices and the Poisson demand process whose intensity is a decreasing function of price. When optimizing the expected revenue, management takes business risk into account by adding a penalty (or premium) to the objective function. We solve the continuous-time model with the exact solution in closed form. We further analyze the influence of risk attitude on optimal policies.
Keywords
inventory/production, perishable/aging items, maximize revenue of perishable products, decision analysis, risk behavior of risk-averse management, probability: stochastic model applications, dynamic point process
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