Prof. Hong Chen
University of British Columbia and China Europe International Business School
Talk:
Joint Pricing and Inventory Control with General Additive Demand
Abstract:
We study a periodic-review, discounted-expected-profit maximization problem for a firm who faces price-sensitive random demand over a finite horizon. Any unsatisfied demand is backlogged. The inventory cost is quasi-convex. We show that a base stock list price policy is optimal for additive demand model under the condition that the demand distribution has a log-concave density function and the expected revenue is quasi-concave in price. Furthermore, if the inventory cost is concave, the optimal selling price is decreasing in the initial level of inventory. This sufficient condition substantially improves the existing sufficient conditions that require the demand function to be concave in price or the expected revenue to be concave in the expected demand, and makes the result applicable to a broad class of demand functions that are supported by economics theory and empirical data. We also extend to this result to the model with a setup ordering cost.
Biography:
Dr. Hong Chen is Professor of Management Science at the Cheung Kong Graduate School of Business (CKGSB). He is one of the founding faculty members of CKGSB and the director of the Clean Energy and Carbon Neutral Development Research Center. Prior to joining CKGSB, he held the positions of Alumni Professor of Supply Chain Management at the University of British Colombia Sauder School of Business, and Professor of Management Science at Shanghai Advanced Institute of Finance. In recent years, his research has focused on clean energy and carbon neutral development, particularly in the fields of investment, technology, and market opportunities in the entire hydrogen value chain. Dr. Hong Chen received his PhD from Stanford University.
