An optimal inventory management problem with reputation-dependent demand

Eugene Khmelnitsky, Gonen Singer

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


The paper addresses a problem of inventory control in a two-echelon retailer-customer setting. The problem incorporates the reputation of the retailer as a key factor influencing its policy. The retailer’s reputation depends on the degree to which past demand was satisfied. In turn, the reputation impacts the distribution of future demand. The optimality conditions developed by means of a perturbation analysis technique enable an optimal base-stock policy, in which the current level of base-stock depends on the retailer’s current reputation.

Original languageEnglish
Pages (from-to)305-316
Number of pages12
JournalAnnals of Operations Research
Issue number1
StatePublished - 2 Aug 2015
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2014, Springer Science+Business Media New York.


  • Inventory control
  • Partial backorders
  • Retailer’s reputation
  • State-costate dynamics


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