SOME EFFECTS OF ADVERTISING AND PRICES ON OPTIMAL INVENTORY POLICY.
Abstract
An inventory model which includes the possibility of advertising (called the basic model) is investigated. This model is a stochastic inventory model with linear ordering costs and increasing, convex holding and penalty cost functions. Results are obtained for both the finite horizon and infinite horizon cases. The optimal policy for the basic model turns out to be very similar to the usual single critical number policies. Several generalizations of the basic model are then considered. One generalization considers the situation where the added demand due to advertising is not deterministic, but stochastic in nature. Under certain conditions, finite horizon results are obtained for this model. The second generalization is to include a set-up cost in the ordering cost function. One-period results are obtained for this model. Finally, an investigation is made of an inventory model in which the selling price is not fixed. Results are obtained for the finite horizon case, and again the optimal policy bears a strong resemblance to the usual single critical number policies. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 05, 1968
- Accession Number
- AD0664219
Entities
People
- Frederic A. Miercort
Organizations
- Stanford University