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Discrete Dynamics in Nature and Society
Volume 2014 (2014), Article ID 105098, 8 pages
http://dx.doi.org/10.1155/2014/105098
Research Article

Joint Optimal Pricing and Ordering Decisions for Seasonal Products with Weather-Sensitive Demand

1School of Management, Southwest University of Political Science and Law, Chongqing 401120, China
2School of Economics and Business Administration, Chongqing University, Chongqing 400044, China
3Chongqing Key Laboratory of Logistics, Chongqing University, Chongqing 400030, China
4College of Mathematics and Statistics, Chongqing Technology and Business University, Chongqing 400067, China

Received 30 November 2013; Accepted 22 February 2014; Published 27 March 2014

Academic Editor: Leonid Shaikhet

Copyright © 2014 Hongyong Fu 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

Retailers selling seasonal products often face the challenge in matching their inventory levels with uncertain market demand which is sensitive to weather conditions, such as the average seasonal temperature. Therefore, how to make the joint ordering and pricing decisions may help retailers to increase their profits. In this paper, we address the joint determination of pricing and ordering decisions in a newsvendor setting, where a retailer (newsvendor) sells the seasonal products and faces demand risk due to weather uncertainty. We show that the maximum expected profit function is continuous and concave, so the optimal solution to the retail price and order quantity exists and it is the one and only solution. In addition, we numerically investigate the impacts of related parameters on the retailer’s expected profit and the optimal pricing and ordering decisions and illustrate some useful management insights into the economic behavior of firms.