A discrete-time probabilistic inventory model for deteriorating items under a known price increase

Abstract

A discrete-time probabilistic inventory model for deteriorating items when the supplier announces a price increase of units from some future date is developed here. Units purchased just before the price increase becomes effective are available at the present lower rate. The problem is to determine an extra large quantity to be procured just before the price increase becomes effective. This is a time decision problem. The model is developed under the conditions of instantaneous delivery, no shortages and a constant fraction of on-hand inventory deterioration. Appropriate formulae have been obtained to procure the gain and the large quantity to be purchased just before the price increases. An example is given to analyze the model developed.

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