Supply chain retailer price markdown policy for deteriorating inventory

Pricing strategy is an interesting and relevant topic in a supply chain, especially for retailers. Many business models on pricing have been developed in recent years. One of the pricing strategies is for the retailers to markdown product price in order to induce larger replenishment from the buyers. The effect of markdown product price is even more obvious for deteriorating items with price-dependent demand. To increase sale, price is marked down during the replenishment time period. An example is used to illustrate the theory, and some interesting results describing the effect of markdown price are derived. Our study shows that markdown pricing policy can increase retailer profit, and it is more sensitive to the deteriorating rate parameter than the initial price parameter.