Joint pricing and inventory control for seasonal and substitute goods

Because of the finite sale period، the inventory and market management of the seasonal goods is important. Also; in the competitive market، the price differences among market segments lead customers to substitute the similar cheaper goods with the expensive ones. We called this substitution “customer-based price driven substitution”. In this paper the joint pricing and inventory control for the seasonal and substitute goods is developed. We assume that two substitute goods belong to two different rival firms. The objective is to determine the optimal price، order quantity and the number of periods for one product such that the total profit is maximized. We first prove that the objective function is concave and have an optimum solution. Next we present an exact algorithm to determine the optimal solutions. Finally، we solve a numerical example for determination the efficiency of the model and algorithm.