Integration of Pricing and Ordering for Downward Substitution Products with Stochastic Demand

Joint decision of ordering and pricing is a more important area at present academic research.There is a vast of literature focusing on this problem.However,most of the literature discussed the decision policy of single product,even seldom literature research multiple products,but they assume that the products are independent.In reality,there are many firms produce multiple products,and they are substitutable among the products.Therefore,in this paper,we built a ordering and pricing joint decision model for two downward substitution products provide the existing condition of optimal order quantity and price under additive demand case.We also compare the profits between perfect information and imperfect information condition,and get the value of the information in the production and pricing decision.