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| Author: | Cheng, F. Sethi, S.P. |
| Title: | A periodic review inventory model with demand influenced by promotion decisions |
| Journal: | Management Science
1999 : NOV, VOL. 45:11, p. 1510-1523 |
| Index terms: | Dynamic programming Decision making Inventory control Models |
| Freeterms: | Markov analysis |
| Language: | eng |
| Abstract: | A Markov decision process is used to model the joint inventory-promotion decision problem. Optimal inventory and promotion decision policies in the finite horizon problem are obtained via dynamic programming. Under certain conditions, it is shown that there is a threshold inventory level P for each demand state such that if the threshold is exceeded, then it is desirable to promote the product. For the proportional ordering cost case, the optimal inventory replenishment policy is a base-stock type policy with the optimal base-stock level dependent on the promotion decision. |
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