This paper investigates an inventory control problem where a firm orders and sells an inventory item
through discount strategy in a price sensitive market.
From the economic points of view, customers may expect a further price reduction when a firm uses
pricing promotion to stimulate demand, the demand curve may vertically shift down
when a firm reduces the selling price.
Taking these phenomena into account, this paper developed a continuous
inventory model for finding the ordering quantity, the number of pricing changing and times of price changes
simultaneously so as to maximize the total profit.
A solution procedure is developed for finding the optimal decision rules.