A retailer's decision process when anticipating a vendor's temporary discount offer

This paper considers a profit-maximizing retailer's decision process when anticipating a vendor's offer of a temporary sale at a reduced price. The retailer is confronted with anticipation and discount periods of unknown length, within which to develop simultaneously the expected profit-maximizing ordering policy needed to purchase the items at the reduced price and the expected profit-maximizing pricing policy to dispose of the temporary sale also at a reduced price. The resulting policies are valid for any probability distribution used to model the uncertainty in the length of the discount period. Numerical examples illustrate the main features of the models.