Optimal pricing and production master planning in a multi-period horizonconsidering capacity and inventory constraints

In this paper we formulate and solve a single item joint pricing and masterplanning optimization problem with capacity and inventory constrains. Theobjective is to maximize profits over a discrete-time multi-period horizon. Thesolution process consists of two steps. First, we solve the single-periodproblem exactly. Second, using the exact solution of the single-period problem,we solve the multi-period problem using a dynamic programming approach. Thesolution process and the importance of considering both capacity and inventoryconstraints are illustrated with a numerical example.