An Inventory Model for Deteriorating Items with Stock and Price Sensitive Demand

It is commonly seen that racks overflowing with large quantity of commodities, displayed in the market attracts more customers. This behavior of the customer suggests that demand varies in proportion with stock level. Also the inventory is subjected to deterioration which leads to some amount of loss to the firm.Taking all these points under consideration,a firm should seriously think of its pricing and ordering strategy, as the demand is highly influenced by the selling price and the inventory level of the commodity. This paper aims to develop an inventory model for finding the strategy for a firm that sells a seasonal item over a finite planning time. Keeping in mind the deterioration rate,the purpose of the paper is to develop a model which maximizes the firm’s expected profit by determining the optimal ordering quantity and price setting/changing strategy.