A joint pricing and inventory control problem under an energy buy-back program

The demand for power keeps rising with rapid economic development and growth of industrialization. The frequent mismatch created between demand and supply can be mitigated by the use of energy buy-back programs. This paper models a buy-back program using a periodic review joint pricing and inventory model, incorporating compensations and setup cost over finite planning horizons. It is shown that an (s,S,A,P∗)(s,S,A,P∗) policy is optimal for the decision maker for maximizing the expected total profit.