Research on Coordinated Replenishment and Pricing with Discount Promotion and Price-Sensitive Stochastic Demand

Focusing on discount promotion in retailer and stochastic customer demand with price-sensitive, the paper brings forward coordinated replenishment and pricing model that simultaneously determines market price and order quantity. The aim is to maximize expected profit in selling period. The model is proved that it is concave function on price and order quantity and its optimal solution is found out. The numerical example analyzes the effect of discount rate on optimal price, order quantity and expected profit. The results show that (1) optimal price, order quantity and expected profit are concave function on discount rate; (2) expected profit is concave function on price. Under price-sensitive demand, the retailer can maximize expected profit with coordination of order quantity, price and discount rate.