Dynamic Stochastic Inventory Management with Reference Price Effects

@article{Chen2016DynamicSI,
  title={Dynamic Stochastic Inventory Management with Reference Price Effects},
  author={Xin Chen and Peng Hu and Stephen Shum and Yuhan Zhang},
  journal={Operations Research},
  year={2016},
  volume={64},
  pages={1529-1536}
}
We analyze a periodic review stochastic inventory model in which demand depends on not only the current selling price but also a memory-based reference price. Pricing and inventory decisions are made simultaneously at the beginning of each period. Assuming all shortages are backlogged, the objective is to maximize the expected total discounted profit over either a finite horizon or an infinite horizon. In the finite horizon case, we prove that a reference price dependent base-stock policy is… CONTINUE READING

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