Group-buying Inventory Policy with Imperfect Items under Inspection Errors

Abstract

A recent occurrence in retail selling has been the development of group-buying websites offering products for a limited time and at highly discounted rates. Our objective of this study is to analyze whether the seller should order quantity in the replenishment cycle of how much better to make the maximum profit. This study determines imperfect quality items and while screening the inspectors may mistake errors. We create the group-buying inventory policy for items with imperfect quality under inspection error. This model is under continuous review and lead time is assumed to be negligible. A numerical example and sensitivity analysis for the fraction of defective items are illustrated.

Keywords

• EOQ,Group buying,Imperfect quality,Inspection errors,Misclassification

References

1. [1] Anand, K. S. and Aron, R., “Group buying on the web: a comparison of price-discovery mechanisms”, Management Science, 49: 1546-1562, (2003).