Inspired by the research background above, we would like to propose the following questions: (1) What is the optimal pricing, service and preservation technology investments policy under resource constraints? (2) How to properly allocate the service and preservation technology investments under resource constraints? (3) How does the resource capacity affect the investments of service and preservation technology?
To answer the research questions, we consider a firm who produces and distributes a single deteriorating product to end consumers with a price and service-dependent demand. Bounded by the common resource constraints, the firm is responsible to invest in both preservation technology and service, where the former is applied to reduce the deterioration rate and the latter is carried out to boost demand. Spurred by the profit-maximization behavior, the firm aims at finding a joint optimal replenishment, pricing, preservation technology investment and dynamic service investment policy during a replenishment cycle. Adopting the optimal control theory, we first calculate the dynamic service investment policy under the given sales price, preservation technology investment and replenishment cycle. An algorithm is then designed to obtain the joint optimal replenishment, pricing, preservation technology and service investments policy. Furthermore, numerical examples we carry out well unveil the allocation of resources between preservation technology investment and service investment. The effect of resource constraints on the investments of preservation technology and service is discussed in detail.