OPTIMAL PRICING AND PRODUCTION POLICIES OF A MAKE-TO-STOCK SYSTEM WITH FLUCTUATING DEMAND

2009 ◽  
Vol 23 (2) ◽  
pp. 205-230 ◽  
Author(s):  
Jean-Philippe Gayon ◽  
Işılay Talay-Değirmenci ◽  
Fikri Karaesmen ◽  
E. Lerzan Örmeci
Keyword(s):  
Dynamic Pricing ◽  
Numerical Study ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Pricing Policy ◽  
Stock Level ◽  
Production Inventory ◽  
Static Pricing ◽  
Make To Stock ◽  
Production Inventory System

We study the effects of different pricing strategies available to a production–inventory system with capacitated supply, which operates in a fluctuating demand environment. The demand depends on the environment and on the offered price. For such systems, three plausible pricing strategies are investigated: static pricing, for which only one price is used at all times, environment-dependent pricing, for which price changes with the environment, and dynamic pricing, for which price depends on both the current environment and the stock level. The objective is to find an optimal replenishment and pricing policy under each of these strategies. This article presents some structural properties of optimal replenishment policies and a numerical study that compares the performances of these three pricing strategies.

scholarly journals Pricing Strategies of Logistics Distribution Services for Perishable Commodities

Algorithms ◽  
2018 ◽  
Vol 11 (11) ◽  
pp. 186
Author(s):  
Tao Li ◽  
Yan Chen ◽  
Taoying Li
Keyword(s):  
Dynamic Pricing ◽  
Consumer Satisfaction ◽  
Service Providers ◽  
Time Constraints ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Pricing Model ◽  
Logistics Service ◽  
Distribution Services ◽  
Perishable Goods

The problem of pricing distribution services is challenging due to the loss in value of product during its distribution process. Four logistics service pricing strategies are constructed in this study, including fixed pricing model, fixed pricing model with time constraints, dynamic pricing model, and dynamic pricing model with time constraints in combination with factors, such as the distribution time, customer satisfaction, optimal pricing, etc. By analyzing the relationship between optimal pricing and key parameters (such as the value of the decay index, the satisfaction of consumers, dispatch time, and the storage cost of the commodity), it is found that the larger the value of the attenuation coefficient, the easier the perishable goods become spoilage, which leads to lower distribution prices and impacts consumer satisfaction. Moreover, the analysis of the average profit of the logistics service providers in these four pricing models shows that the average profit in the dynamic pricing model with time constraints is better. Finally, a numerical experiment is given to support the findings.

scholarly journals The Impact of Price Comparison Service on Pricing Strategy in a Dual-Channel Supply Chain

2013 ◽  
Vol 2013 ◽  
pp. 1-13 ◽  
Author(s):  
Qi Xu ◽  
Zheng Liu ◽  
Bin Shen
Keyword(s):  
Supply Chain ◽  
Numerical Study ◽  
Profit Maximization ◽  
Pricing Strategy ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Price Comparison ◽  
Dual Channel ◽  
Dual Channel Supply Chain ◽  
The Impact

Recently, price comparison service (PCS) websites are more and more popular due to its features in facilitating transparent price and promoting rational purchase decision. Motivated by the industrial practices, in this study, we examine the pricing strategies of retailers and supplier in a dual-channel supply chain influenced by the signals of PCS. We categorize and discuss three situations according to the signal availability of PCS, under which the optimal pricing strategies are derived. Finally, we conduct a numerical study and find that in fact the retailers and supplier are all more willing to avoid the existence of PCS with the objective of profit maximization. When both of retailers are affected by the PCS, the supplier is more willing to reduce the availability of price information. Important managerial insights are discussed.

Optimal Pricing Strategies for an Inventory System with Perishable Items and Waiting Time Dependent Order Cancellations

2009 ◽  
Vol 2 (4) ◽  
pp. 80-95 ◽  
Author(s):  
A. Thangam ◽  
R. Uthayakumar
Keyword(s):  
Waiting Time ◽  
Numerical Study ◽  
Solution Procedure ◽  
Inventory System ◽  
Optimal Order ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Perishable Items ◽  
Demand Functions ◽  
Advance Sales

Although many researchers have studied inventory models for perishable items, the situation of advance sales, spot sales and order cancellations have not been addressed so far. However, this problem arises in a variety of industries including the sales of fashion garments, flight seats and hotel rooms. In this article, we deal with an inventory system in which sales cycle is divided into an advance sales period and a spot sales period. We consider order cancellation effect which depends on the waiting time of the customer orders. The goal is to determine the optimal order quantity and optimal prices in order to maximize the profit. We also show the concavity of the profit function using mathematical lemmas and theorem. Besides we develop a solution procedure which computes optimal policy effectively. Finally we present the results of numerical study for linear and exponential demand functions.

Dynamic pricing of perishable food as a sustainable business model

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Michael Scholz ◽  
Roman-David Kulko
Keyword(s):  
Willingness To Pay ◽  
Food Waste ◽  
Dynamic Pricing ◽  
Pricing Strategy ◽  
Pricing Strategies ◽  
Sustainable Business ◽  
Content Type ◽  
Food Retailers ◽  
Static Pricing ◽  
The Impact

PurposeThe purpose of this paper is to (1) investigate the effect of freshness on consumers' willingness to pay, (2) derive static and dynamic pricing strategies and (3) compare the effect of these pricing strategies on a retailer's revenue and food waste. This investigation helps to reveal the potentials of dynamic pricing strategies for building more sustainable business models.Design/methodology/approachThe authors conduct an online experiment to measure consumers' willingness to pay for fresh and three-days’ old strawberries. The impact of freshness on willingness to pay is analysed using univariate tests and regression analysis. Pricing strategies are compared using a Monte Carlo simulation.FindingsThe results of this study show that freshness largely determines consumers' willingness to pay and price sensitivity. This renders dynamic pricing a promising strategy from an economic point of view. The results of the simulation study show that food waste can be reduced by up to 53.6% with a dynamic pricing instead of a static pricing strategy in the case that there are as many consumers as strawberry packages in the inventory. Revenue can be increased by up to 10% compared to a static pricing strategy based on fresh strawberries.Practical implicationsThis study suggests that food retailers can improve their revenue when switching from static to dynamic pricing. Furthermore, in most cases, food retailers can reduce food waste with a dynamic instead of a static-pricing strategy, which might help to improve their image through a more sustainable business model and attract additional consumers.Originality/valueThis study is the first to analyse the possibility of using food freshness to design a dynamic pricing strategy and to analyse the impact of such a pricing strategy on both, a retailer's revenue and a retailer's food waste.

Optimal pricing model for non-instantaneous deterioration items with price and freshness sensitive demand under the e-commerce environment in China

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Weihua Xu ◽  
Ketong Zhao ◽  
Yixuan Shi ◽  
Sun Bingzhen
Keyword(s):  
Dynamic Pricing ◽  
Decision Problems ◽  
Theoretical Research ◽  
Pricing Strategy ◽  
Optimal Pricing ◽  
Managerial Decision ◽  
Pricing Policy ◽  
Content Type ◽  
Demand Rate ◽  
Total Profit

Purpose The purpose of this paper is to focus on determining the optimal sales price for non-instantaneous deterioration items according to consideration of freshness and demand. Design/methodology/approach In this model, the authors have described the demand function which is dependent on price as well time. The products that the deterioration is considered as non-instantaneous have a determinate shelf life, and their demand rate will decrease over time after the beginning of the selling period. This paper depicts that the total profit of non-instantaneous deterioration items using the dynamic pricing strategy is higher than that using fixed pricing strategy. Findings Finally, to illustrate and validate the model, the authors have used some numerical examples. A new freshness function and the model to study pricing policy are developed as well applied to solve managerial decision problems. Originality/value This paper complements the lack of the existing theoretical research of pricing for non-instantaneous deterioration items under an e-commerce environment. A new freshness function and the model to study pricing policy are developed as well applied to solve managerial decision problems.

scholarly journals Dynamic Pricing of Fashion-Like Multiproducts with Customers’ Reference Effect and Limited Memory

2014 ◽  
Vol 2014 ◽  
pp. 1-10 ◽  
Author(s):  
Mengqi Liu ◽  
Wenjie Bi ◽  
Xiaohong Chen ◽  
Guo Li
Keyword(s):  
Steady State ◽  
Dynamic Pricing ◽  
Reference Price ◽  
Memory Window ◽  
Optimal Pricing ◽  
Price Effect ◽  
Pricing Policy ◽  
Limited Memory ◽  
Bounded Memory ◽  
State Price

We study a fashion retailer’s dynamic pricing problem in which consumers present reference effect and memory window. Based on the theory of Baucells et al. (2011), we propose a new reference-price updating mechanism in fashion and textile (FT) industry where consumers have a bounded memory window and anchor on the first and most recent price in any memory window. Moreover, we study the impacts of this mechanism on optimal pricing policy for a retailer selling multiple fashion-like products and analyze optimal price’s steady state, monotonicity, and convergence. For two-product case, we find that, for otherwise identical products, the steady-state price of a core product is lower than that of a noncore product. We compute the retailer’s loss of revenue if he incorrectly assumes the reference-price effect to be at the product level and prices the products individually. Further, as illustrated with numerical results, our model is a flexible way to make pricing strategy if the retailer can anticipate the length of consumers’ memory window.

scholarly journals Dynamic Pricing of a Web Service in an Advance Selling Environment

2015 ◽  
Vol 2015 ◽  
pp. 1-21 ◽  
Author(s):  
Ehram Safari ◽  
Masoud Babakhani ◽  
Seyed Jafar Sadjadi ◽  
Kamran Shahanaghi ◽  
Khadijeh Naboureh
Keyword(s):  
Web Service ◽  
Dynamic Pricing ◽  
Service Providers ◽  
Pricing Strategies ◽  
State Variables ◽  
Pricing Policy ◽  
Service Levels ◽  
Time Optimal ◽  
Reservation System ◽  
The Web

Consider a web service with different quality of service levels where users may purchase their required web service through a reservation system. The service provider adjusts prices of web service classes over a prespecified time horizon to manage demand and maximize profit. Users may cancel their services as long as they pay a penalty. One of the important challenges for service providers is capacity limitation of the resources employed in offering the web service. Thus, taking this important proposition into account makes pricing strategies considered by the provider has more credit. Another important factor in determining pricing strategies discussed in the present paper is the market influence which can increase or decrease the price that the provider offers. This paper develops a continuous time optimal control model for identifying pricing strategies for the web service classes. We study the optimality condition of the considered model based on maximum principal and propose an algorithm to obtain the optimal pricing policy. Moreover, we perform numerical analyses to evaluate the effect of some parameters on control and state variables and objective function. In addition, we compare the proposed algorithm with genetic algorithm (GA) and simulated annealing (SA) available in Matlab.

OPTIMAL DYNAMIC PRICING FOR USED PRODUCTS IN REMANUFACTURING OVER AN INFINITE HORIZON

2014 ◽  
Vol 31 (03) ◽  
pp. 1450012 ◽  
Author(s):  
GENDAO LI ◽  
BAOFENG SUN
Keyword(s):  
Dynamic Pricing ◽  
Numerical Study ◽  
Infinite Horizon ◽  
Inventory Cost ◽  
Pricing Policy ◽  
The Core ◽  
Markov Decision ◽  
Optimal Dynamic ◽  
Acquisition Management ◽  
Retail Setting

The return of used products (cores) is the beginning of remanufacturing. Although an appropriate pricing policy can effectively manage the returns, a static pricing policy cannot match the returns and demands because of the high uncertainties in both sides, which in turn results in high inventory cost or lost-sale cost. In this paper, we apply a dynamic pricing policy commonly used in retail setting to the core acquisition management in remanufacturing and study the pricing problem for used products with the objective of minimizing average cost over an infinite horizon. We formulate the pricing problem as a continuous-time Markov decision process and characterize the structural properties of the optimal policy. We also conduct a numerical study to investigate the benefit of dynamic pricing.

scholarly journals Dynamic Optimal Pricing of Ridesharing Platforms under Network Externalities with Stochastic Demand

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-16
Author(s):  
Wenjie Wang ◽  
Lei Xie
Keyword(s):  
Social Welfare ◽  
Dynamic Pricing ◽  
Network Externalities ◽  
Stochastic Demand ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Declining Demand ◽  
Negative Effect ◽  
Demand Scenario ◽  
Uncertain Supply

Ridesharing two-sided platforms link the stochastic demand side and the self-scheduling capacity supply side where there are network externalities. The main purpose of this paper is to establish the optimal pricing model of ridesharing platforms to dynamically coordinate uncertain supply and stochastic demand with network externalities in order to maximize platforms’ revenue and social welfare. We propose dynamic pricing strategies under two demand scenarios that minimize order loss in the surge demand period and maximize social welfare in the declining demand period. The numerical simulation results show that dynamic pricing strategies could stimulate the supply to reduce delayed orders in the surge demand scenario and adjust the demand to maximize social welfare under declining demand scenario. Additionally, we further find that the direct network externalities positively influence the platforms’ revenue, and the indirect network externalities have a negative effect on social welfare in the declining demand scenario, and a higher wage ratio cannot enhance the platforms’ revenue.

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