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Mathematical Problems in Engineering
Volume 2015 (2015), Article ID 789306, 8 pages
http://dx.doi.org/10.1155/2015/789306
Research Article

Dynamic Pricing and Production Control of an Inventory System with Remanufacturing

1Department of Management Science, Southwestern University of Finance and Economics, Chengdu, Sichuan 611130, China
2School of Business Administration, Southwestern University of Finance and Economics, Chengdu, Sichuan 611130, China

Received 14 September 2015; Revised 14 November 2015; Accepted 24 November 2015

Academic Editor: Young Hae Lee

Copyright © 2015 Chunyan Gao 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

We consider optimal pricing and manufacturing control of a continuous-review inventory system with remanufacturing. Customer demand and product return follow independent Poisson processes. Customer demand is filled by serviceable product, which can be either manufactured or remanufactured from the returned product. The lead times for both manufacturing and remanufacturing are exponentially distributed. The objective is to maximize the expected total discounted profit over an infinite planning horizon. We characterize the structural properties of the optimal policy through the optimality equation. Specifically, the optimal manufacturing policy is a base-stock policy with the base-stock level nonincreasing in the return inventory level. The optimal pricing policy is also a threshold policy, where the threshold level is nonincreasing in the return inventory level.