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Journal of Industrial Engineering
Volume 2013 (2013), Article ID 593108, 9 pages
http://dx.doi.org/10.1155/2013/593108
Research Article

A Price-Dependent Demand Model in the Single Period Inventory System with Price Adjustment

Department of Industrial Engineering, University of Kharazmi, Tehran, Iran

Received 31 August 2012; Revised 20 November 2012; Accepted 26 November 2012

Academic Editor: Jun Zhao

Copyright © 2013 Kamran Forghani et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The previous efforts toward single period inventory problem with price-dependent demand only investigate the optimal order quantity to minimize the total inventory costs; however, there is no method in the literature to avoid unwanted costs due to the deviation between the actual demand and the previously estimated demand. To fill this gap, the present paper supposes that stochastic demand rate with normal distribution is sensitive to the selling price; this means that increasing the selling price would decrease the demand rate and vice versa. After monitoring the consumption trend within a section of the period, a new selling price is implemented to change the demand rate and reduce the shortage or salvage costs at the end of the period. Three functions were suggested to represent the demand rate as a function of selling price, and the numerical analysis was implemented to solve the proposed problem. Finally, an illustrative numerical example was solved for different configurations in order to show the advantages of the proposed model. The results revealed that there is a significant improvement in the system costs when price revision is considered.