scholarly journals Two-Period Dynamic versus Fixed-Ratio Pricing Policies under Duopoly Competition

2019 ◽  
Vol 2019 ◽  
pp. 1-11 ◽  
Author(s):  
Hao Li ◽  
Xi Yang ◽  
Yu Tu ◽  
Ting Peng
Keyword(s):  
Dynamic Pricing ◽  
Utility Maximization ◽  
Fixed Ratio ◽  
The Other ◽  
Optimal Pricing ◽  
Perishable Products ◽  
Pricing Policy ◽  
Pricing Policies ◽  
Current Price ◽  
Identical Product

This paper introduces a two-period, pricing policy under duopoly competition between two firms offering an identical product to consumers who are intertemporal utility maximization. Firms have equal inventories of faultlessly replaceable and perishable products. The firms adjust prices to maximize profits and determine optimal pricing policies, choosing from dynamic pricing, fixed-ratio pricing, and elastic pricing policies. According to a duopoly competition model, the consumer is limited to a single firm visit per period. The consumer decides to purchase the product at current price from a firm and remain in the market to purchase product from the other firm in the next period or exit the market. The results offer three main conclusions. First, elastic pricing is consistent with dynamic pricing. Second, the more consumers visit the firm in the first period, the more profits the firm will make. Third, we explore the effectiveness of different pricing policies. The results show that although dynamic pricing is a more complex policy than fixed-ratio pricing, it may lead to decreased equilibrium profits when the firms sharply discounts prices and consumer rationality is unlimited.

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 Optimal pricing policies for perishable products

2005 ◽  
Vol 166 (1) ◽  
pp. 246-254 ◽  
Author(s):  
Miguel F. Anjos ◽  
Russell C.H. Cheng ◽  
Christine S.M. Currie
Keyword(s):  
Optimal Pricing ◽  
Perishable Products ◽  
Pricing Policies

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 Effective Pricing of Perishables for a More Sustainable Retail Food Market

2019 ◽  
Vol 11 (17) ◽  
pp. 4762
Author(s):  
Jaekwon Chung
Keyword(s):  
Dynamic Pricing ◽  
Food Industry ◽  
Consumer Demand ◽  
Optimal Pricing ◽  
Perishable Products ◽  
Expiration Date ◽  
Food Retailing ◽  
Food Retailers ◽  
Food Market ◽  
Retail Food

Developing effective ways to manage perishable foods is crucial for food retailers to survive in the highly competitive retail food industry. Due to the nature of perishability, it is necessary to find an effective selling strategy to reduce waste from unsold perishables. Prior studies have proposed using dynamic pricing to develop an optimal pricing structure that compensates the consumer for the loss of freshness as the expiration date approaches. However, these studies have not considered consumer demand that more consumers are likely to purchase units of perishable products with relatively more or fewer days before expiration. In addition, prior studies have not compared dynamic pricing to a “no discount” policy whereby a retailer only displays those perishables that have the fewest remaining days to expiration, keeping units with a longer time before expiration in a warehouse. The results of this study show the potential impacts of different pricing by considering these issues. This study provides new insights for retailers to manage perishable foods with small and large packages that improve the sustainability of food retailing.

PRICING PERISHABLE PRODUCTS WITH COMPOUND POISSON DEMANDS

2011 ◽  
Vol 25 (3) ◽  
pp. 289-306 ◽  
Author(s):  
Pengfei Guo ◽  
Zhaotong Lian ◽  
Yulan Wang
Keyword(s):  
Dynamic Pricing ◽  
Sample Path ◽  
Compound Poisson Process ◽  
Optimal Pricing ◽  
Stochastic Comparison ◽  
Perishable Products ◽  
Sample Path Analysis ◽  
Compound Poisson ◽  
Comparison Approach ◽  
Poisson Demands

We consider the dynamic pricing problem of perishable products in a system with a constant production rate. Potential demands arrive according to a compound Poisson process, and are price-sensitive. We carry out the sample path analysis of the inventory process and by using level-crossing method, we derive its stationary distribution given a pricing function. Based on the distribution, we express the average profit function. By a stochastic comparison approach, we characterize the pricing strategy given different customers willingness-to-pay functions. Finally, we provide an approximation algorithm to calculate the optimal pricing function.

scholarly journals Competition and cooperation models for dynamic pricing of perishable products in a two-echelon supply chain

2020 ◽  
Author(s):  
Zhenkai Lou ◽  
Xuming Lou ◽  
Fujun Hou
Keyword(s):  
Supply Chain ◽  
Dynamic Pricing ◽  
Optimal Pricing ◽  
Perishable Products ◽  
Sales Price ◽  
Competition And Cooperation ◽  
Optimal Pricing Strategy ◽  
Cycle Lengths ◽  
Total Profit ◽  
Finite Time Horizon

This paper considers a two-level supply chain involving a supplier and a retailer. The retailer sells perishable products to consumers over a finite time horizon, and the demand is driven by a price-and-utility function. First, we study the noncooperative problem, which is formulated by a Stackelberg model. It is shown that the optimal pricing strategy of the retailer is to reduce a constant amount on the price at the beginning of each stage. Second, we examine the cooperative problem, in which the supplier and the retailer jointly price the product. Maximum selling cycle lengths of the two situations are obtained by analyzing the reasonability of the sales price. We demonstrate that the selling cycle length is extended by cooperation. Moreover, we show that they lower the sales price in the cooperative case so as to maximize the total profit. Meanwhile, an allocation method is provided based on the proportion.

Dynamic Pricing for New Products Using a Utility-Based Generalization of the Bass Diffusion Model

2022 ◽  
Author(s):  
Koray Cosguner ◽  
P. B. (Seethu) Seetharaman
Keyword(s):  
Diffusion Model ◽  
Dynamic Pricing ◽  
New Product ◽  
Optimal Pricing ◽  
Model Parameters ◽  
Bass Model ◽  
Pricing Policy ◽  
Track Record ◽  
Marketing Variables ◽  
Product Sales

The Bass Model (BM) has an excellent track record in the realm of new product sales forecasting. However, its use for optimal dynamic pricing or advertising is relatively limited because the Generalized Bass Model (GBM), which extends the BM to handle marketing variables, uses only percentage changes in marketing variables, rather than their actual values. This restricts the GBM’s prescriptive use, for example, to derive the optimal price path for a new product, conditional on an assumed launch price, but not the launch price itself. In this paper, we employ a utility-based extension of the BM, which can yield normative prescriptions regarding both the introductory price and the price path after launch, for the new product. We offer two versions of this utility-based diffusion model, namely, the Bass-Gumbel Diffusion Model (BGDM) and the Bass-Logit Diffusion Model (BLDM), the latter of which has been previously used. We show that both the BGDM and BLDM handily outperform the GBM in forecasting new product sales using empirical data from four product categories. We discuss how to estimate the BGDM and BLDM in the absence of past sales data. We compare the optimal pricing policy of the BLDM with the GBM and derive optimal pricing policies that are implied by the BLDM under various ranges of model parameters. We illustrate a dynamic pricing approach that allows managers to derive optimal marketing policies in a computationally convenient manner and extend this approach to a competitive, multiproduct case. This paper was accepted by Gui Liberali for the Management Science Special Issue on Data-Driven Prescriptive Analytics.

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.

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