Coordinated Lot-sizing and Dynamic Prizing under a Supplier All-units Quantity Discount

We consider an economic order quantity model where the supplier offers an all-units quantity discount and a price sensitive customer demand. We compare a decentralized decision framework where selling price and replenishment policy are determined independently to simultaneous decision making. Constant and dynamic pricing are distinguished. We derive structural properties and develop algorithms that determine the optimal pricing and replenishment policy and show how quantity discounts not only influence the purchasing strategy but also the pricing policy. A sensitivity analysis indicates the impact of the fixed-holding cost ratio, the discount policy, and the customers' price sensitivity on the optimal decisions.

Using Dynamic Programming Decomposition for Revenue Management with Opaque Products

Opaque products enable service providers to hide specific characteristics of their service fulfillment from the customer until after purchase. Prominent examples include internet-based service providers selling airline tickets without defining details, such as departure time or operating airline, until the booking has been made. Owing to the resulting flexibility in resource utilization, the traditional revenue management process needs to be modified. In this paper, we extend dynamic programming decomposition techniques widely used for traditional revenue management to develop an intuitive capacity control approach that allows for the incorporation of opaque products. In a simulation study, we show that the developed approach significantly outperforms other well-known capacity control approaches adapted to the opaque product setting. Based on the approach, we also provide computational examples of how the share of opaque products as well as the degree of opacity can influence the results.