Modeling and analyzing the effect of financial flows in inventory management

Abstract

In the rst part of this study, we examine two dierent nancially constrainedinventory management problems. First, we insert a payment constraint into thenewsvendor problem with pricing. A newsvendor decides on how many items to orderand also how to price them, since demand is random but a function of price. Wenumerically compare two cases; with and without payment constraints and analyzehow nancial constraints aect newsvendor's decisions. Second, we investigate adynamic pricing problem with shortfall minimization objective. The seller wants tominimize a possible positive gap between a target level and his total prot. Weperform a numerical comparison between the classical expected prot maximizationdynamic pricing problem and our version.In the second part, we investigate a simple dynamic inventory problem with ran-dom supply. A seller decides whether to order or not in a given period when theprobability of receiving the ordered item is less than 1. We investigate this prob-lem with two kinds of objectives: the expected prot maximization and the expectedutility maximization.In the third part, we consider the dynamic pricing problem of inventories witha risk-averse approach. Risk-aversion manifests itself in our problem as a utilitymaximization formulation. In the classical dynamic pricing problem, the objectiveof the seller is purely to maximize the expected total prot obtained by selling hisinventories. In our problem, the objective of the seller is to maximize the expectedutility. We use an exponential utility function where the risk tolerance constantreects the risk-aversion degree of the seller. For this formulation, we establish somestructural properties of the optimal solution. A numerical study investigating theinuence of risk-aversion on pricing decisions is also presented.