A joint pricing and lot sizing models with discount: A geometric programming approach

Abstract

We propose a novel joint pricing and lot sizing model to enable manufacturers plan production and pricing. These types of models have proven to be very popular and are collectively known as the Joint Pricing and Lot sizing Models. We include a discount factor in our model to increase profit for the manufacturer. Our proposed model relies on the fact that demand influences production cost indirectly, while it is dependent on price and the discount offered. By considering the form of demand and production cost, it is apparent that the presented model is a Signomial Geometric Programming problem. We obtain optimal solutions for price, lot size and discount factor by applying the modified transformation method of geometric programming. Numerical examples, which include sensitivity analysis of the objective function and parameters, illustrate our model. References

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