© Mexican Journal of Operations Research, Vol. 2, No. 1, Jan-Jun 2013, pp. 2-19. ISSN: 2007-5138. Received Feb 9, 2013 / Accepted May 13, 2013 Editorial Académica Dragón Azteca (EDITADA.ORG) Optimal integrated inventory policy for deteriorating items with stock-dependent demand and trade credit linked to order quantity Nita H. Shah 1 , Dushyantkumar G. Patel 2 and Digeshkumar B. Shah 3 1 Department of Mathematics, Gujarat University, Ahmedabad-380009, Gujarat, India 2 Department of Mathematics, Govt. Poly. for Girls, Ahmedabad-380015, Gujarat, India 3 Department of Mathematics, L. D. College of Engg., Ahmedabad-380015, Gujarat, India E-mail: 1nitahshah@gmail.com,2dushyantpatel_1981@yahoo.co.in, 3digeshshah2003@yahoo.co.in Abstract In this article, an attempt is made to analyze the effect of credit period for order of pre-specific units by the vendor. The joint system under consideration is for vendor-buyer when units in inventory are subject to deterioration at a constant rate under stock-dependent demand and order-dependent trade credit. The joint total profit is maximized with respect to buyer’s order quantity and number of shipments from the vendor to the buyer during a cycle time. Numerical examples and sensitivity analysis are given to validate the mathematical model and to find critical inventory parameters. The managerial issues are discussed. Key Words: Vendor-buyer joint inventory system, Stock-dependent demand, Deterioration, Trade-credit linked to order quantity. 1 Introduction In today’s business transactions, the vendor offers innovative promotional tools to attract more and more customers which stimulate the demand. The most common tools used by the vendor are permissible delay in payments or price discounts to the buyer. The vendor offers the retailer a credit period without interest to survive in market. Before the end of the credit period, the retailer can sell the items and earn interest on the generated revenue. A higher interest is charged if the payment is not settled by the end the credit period. One can refer to articles by Goyal (1985), Dave (1985), Shah (1993a, 1993b).