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An Integrated Model of Pricing and Production with Reference Price Effect and Quality Diversity

Zamani Kahnamouei, Hatef | 2017

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 50166 (01)
  4. University: Sharif University of Technology
  5. Department: Industrial Engineering
  6. Advisor(s): Modarres Yazdi, Mohammad
  7. Abstract:
  8. In this research, we consider a made-to-order production system which receives orders for a single product. The demand is stochastic and price-dependent. We also consider a sale index that links the demand of each period to the demands as well as to the quality of the previous periods. The variety of quality levels and its effect on the amount of orders make this revenue management complicated. Furthermore, the price of each product is related to its quality and sales index. Furthermore, reference price causes the model to be significantly more complicated. We model the problem within the framework of dynamic programming approach to maximize the discounted profit of the firm during a finite and multi-period horizon. The strategy of the firm can either be to reduce the production level, i.e. under capacity and consequently losing some demand or reduce the product quality by increasing the production level in order to avoid the opportunity cost of demand loss. We develop an integrated system of pricing and production decisions. Then, we investigate the structure of the optimal solution to characterize the optimal policies. Depending on the assumption of restricted or unrestricted production capacity and also based on the reference price effect, we consider three cases and develop appropriate policies for each case. Finally, we solve some numerical examples in each situation in order to illustrate our proposed approach
  9. Keywords:
  10. Reference Price ; Revenue Management ; Integrated System ; Dynamic Programming ; Pricing ; Make-to-Order

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