Optimal pricing and ordering policies for non-instantaneously deteriorating items under order-size-dependent delay in payments

In today’s competitive business transactions, the supplier may permit his/her retailers a delay in payment in order to encourage the retailers to buy more. During the permissible delay period, the retailer is allowed to postpone paying for the products bought without incurring any interest. In this study, we consider an inventory system with non-instantaneously deteriorating items in circumstances where the supplier provides the retailer with various trade credits linked to order quantity. First, we develop a mathematical model to identify the optimal pricing and ordering policies for maximizing the retailer’s total profit. This followed by a discussion of the characteristics of the optimal solution. We then propose some algorithms for finding the optimal solutions. Finally, numerical examples are presented and a sensitivity analysis is undertaken to illustrate the proposed model.