A note on the relationship among capacity, pricing, and inventory in a make-to-stock system

Gad Allon; Assaf Zeevi

doi:10.1111/j.1937-5956.2010.01193.x

A note on the relationship among capacity, pricing, and inventory in a make-to-stock system

Gad Allon^*, Assaf Zeevi

^*Corresponding author for this work

Managerial Economics, Decision Sciences and Operations

Research output: Contribution to journal › Article › peer-review

14 Scopus citations

Abstract

We address the simultaneous determination of pricing, production, and capacity investment decisions by a monopolistic firm in a multi-period setting under demand uncertainty. We analyze the optimal decision with particular emphasis on the relationship between price and capacity. We consider models that allow for either bi-directional price changes or models with markdowns only, and in the latter case we prove that capacity and price are strategic substitutes.

Original language	English (US)
Pages (from-to)	143-151
Number of pages	9
Journal	Production and Operations Management
Volume	20
Issue number	1
DOIs	https://doi.org/10.1111/j.1937-5956.2010.01193.x
State	Published - Jan 2011

Keywords

capacity investment
inventory
pricing
stochastic demand

ASJC Scopus subject areas

Management Science and Operations Research
Industrial and Manufacturing Engineering
Management of Technology and Innovation

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1111/j.1937-5956.2010.01193.x

Cite this

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AB - We address the simultaneous determination of pricing, production, and capacity investment decisions by a monopolistic firm in a multi-period setting under demand uncertainty. We analyze the optimal decision with particular emphasis on the relationship between price and capacity. We consider models that allow for either bi-directional price changes or models with markdowns only, and in the latter case we prove that capacity and price are strategic substitutes.

KW - capacity investment

KW - inventory

KW - pricing

KW - stochastic demand

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A note on the relationship among capacity, pricing, and inventory in a make-to-stock system

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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