A stochastic EPLS model with random price sensitive demand

TL;DRAbstract

Abstract In real estate businesses, the price fluctuates due to the variation of a number of factors such as brokerage, inflation and time value of money etc. In this article we consider an stochastic EPLS (economic production lot size) model with price sensitive demand when the price is random in character. The model investigates a self manufacturing/finite replenishment rate with profit maximization problem for a single item over finite time horizon, allowing shortages. A general model is built up by taking production cost, holding cost, shortage cost and selling price into consideration. The general model is analyzed by considering three different distributions of selling price: uniform distribution, exponential distribution and linear distribution for showing the flexibility and utility of the model. Numerical examples are illustrated to test the proposed model. Sensitivity analysis is carried out. A comparative study between these three distributions has also been done.

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