Th. Burwell et al., ECONOMIC LOT-SIZE MODEL FOR PRICE-DEPENDENT DEMAND UNDER QUANTITY ANDFREIGHT DISCOUNTS, International journal of production economics, 48(2), 1997, pp. 141-155
Previous studies have developed procedures which determine optimal lot
size and selling price when demand depends on price and all-unit quan
tity discounts are offered. Further, recent studies have addressed the
concepts of quantity and freight discounts for constant demand. In th
is paper, we incorporate quantity and freight discounts in inventory d
ecision making when demand, rather than being constant, is considered
to be dependent upon price. An algorithm is developed to determine the
optimal lot size and selling price for a class of demand functions, i
ncluding constant price-elasticity and linear demand. A numerical exam
ple is provided to illustrate the model and a computer program is deve
loped to implement the model derived in the paper.