Pricing and Inventory Policies Under a Deterministic Supply Cycle

Abstract The research investigates optimal pricing and inventory policies in the case in which the demands of different periods are identical. However, the supplies fluctuate due to cycles in nature as well as additional environmental and other factors. Each cycle contains two periods or seasons. A peak season with a large given supply is followed by a regular season with a small supply. The model deals with deterministic supply and the question of what policy is adopted regarding the quantities produced and sold in the markets at each period. It first considers the case without the use of inventory for delivery between periods. In the second case, inventory that can be produced at the peak period is only for sale at the regular period. It is sold as non-fresh inventory that is a ‘supplement’ to the fresh output produced at the regular period.