Determining Optimal Selling Price and Lot Size When the Supplier Offers All‐Unit Quantity Discounts*

ABSTRACT This paper is concerned with finding the optimal price and lot size for a retailer purchasing a product for which the supplier offers all‐unit quantity discounts. Demand for the product is assumed to be a decreasing function of price, and a procedure is developed for finding the optimal price and lot size for a class of demand functions. The procedure then is applied to two common demand functions: (1) the constant price‐elasticity function, and (2) the linear demand function.