ECONOMIC LOT-SIZE MODEL FOR PRICE-DEPENDENT DEMAND UNDER QUANTITY ANDFREIGHT DISCOUNTS

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.