Optimal pricing and ordering policies for deteriorating items with multivariate demand under trade credit and inflation

In this paper we develop an extended economic order quantity model for deteriorating items under inflation and permissible delay in payments where demand rate is a linear function of price and decreases negative exponentially with time. The mathematical models are derived to determine the optimal replenishment and pricing policies over a finite planning horizon under two different trade credit period circumstances. An efficient solution procedure is presented to determine the optimal number of replenishment, the cycle time and selling price. Thus the optimal order quantity and the total present value of profits are obtained. Finally, a numerical example is given to illustrate the theoretical results and sensitivity analysis with respect to major parameters is also performed. © 2012 Operational Research Society of India.