An Inventory Model for Deteriorating Items with Price Dependent Demand and Delay in Payments under Stochastic Inflation Rate

Abstract

The paper studies an inventory model for deteriorating items under permissible delay in payment and stochastic inflation conditions. The deteriorating rate is assumed to be constant and the demand for the item is dependent on its selling price. A periodic review policy has been used over a finite planning period. The inflation rate changes from one periodic cycle to another following some probabilistic law. The optimal policy is determined so as to maximize the total profit over the planning horizon. Numerical examples are cited to illustrate the theoretical results, and a sensitivity analysis is carried out to examine the effect of the model parameters on the optimal policy.