Optimal pricing and ordering policy for defective items under temporary price reduction with inspection errors and price sensitive demand

<p style='text-indent:20px;'>This paper studies the retailer's optimal promotional pricing, special order quantity and screening rate for defective items when a temporary price reduction (i.e., TPR) is offered. Although previous have examined similar issue, they assume constant demand an error-free process. A subversion of these two assumptions differentiates our paper. First, using price-sensitive demand, we analyze that original may be insufficient, propose CPD control demand) ISR increase through investment) strategy to handle it. Second, incorporate both Type I II inspection errors into model. Then establish inventory model aiming maximize profit under ISR, respectively. Finally, numerical examples are conducted several results obtained: (1) higher portion defects makes more profitable; (2) probability error decrease but has pronounced negative impact; (3) comparing with existing generates especially in markets sensitivity.</p>