Economic Order Quantity Models for Price Dependent Demand and Different Holding Cost Functions

Abstract

Demand for any type of item depends on its nature like; sensitivity for the price and degree of freshness. Previous inventory models usually assumed that the demand of the commodities was constant or stock-dependent. This paper develops an EOQ models for items whose demand is a decreasing function of selling price. The first model assumes holding cost is non-linear multiplicative function of selling price and time. In the second model holding cost is considered to be non-linear multiplicative function of selling price and level of current inventory. Under these assumptions, we first formulate mathematical models and then some useful theoretical results have been discussed to characterize the optimal solutions. Numerical examples are provided to illustrate the proposed model and optimal solution. The sensitivity analysis is performed and managerial insights are proposed.

Key words and phrases. Inventory, selling price, demand rate, non-linear, holding cost.

1991 Mathematics Subject Classification. 90B05