A Discrete Inventory Model When Sale Price varies with Stock Level

We present an inventory model in which the items are initially sold at price p1 per unit, and later at a reduced price p2 per unit when stock level drop below a specified level. The demand is assumed to be Poisson and holding cost is incurred only for the period during which the inventory items are in the stock. It is shown that determination of optimum inventory level requires the solution of a cubic equation.