Article Contents
Article Contents

# Optimal pricing of perishable products with replenishment policy in the presence of strategic consumers

• * Corresponding author: Xiaohong Chen
• Recognizing that strategic consumers have become increasingly common in the perishable products market, we develop a two-stage pricing model for a monopolistic firm with two classes of inventory strategies: non-replenishment and replenishment. First, the retailer mapping out his pricing policy, and then consumers determining their buying behavior given the retailers policy. Our results indicate that the game equilibrium exists between retailers and consumers in both cases. For a given realized price and inventory policy, the consumer's space is split into several areas by the optimal threshold functions. Inventory replenishment decisions are affected by market demand and a decline factor of consumers reservation value. The retailers profit loss is not necessarily related to the consumers waiting behavior but results from the ignorance of this behavior when pricing.

Mathematics Subject Classification: Primary: 90B60; Secondary: 91B06.

 Citation:

• Figure 1.  Customer types for the case without inventory replenishment1

Figure 2.  Customer types for the case with inventory replenishment2

Figure 3.  Impact of Pricing Strategies on Consumer Waiting Behavior

Figure 4.  Variation of the Profits of a Seller with an Initial Stock

Figure 5.  Impact of Q and $\lambda$ on the Profits of Sellers

Figure 6.  Profits of a Seller with $\alpha$ Change

Table 1.  Pricing Strategy and Retailer Expected Profits Under Both Scenarios3

 Q $[p_1, p_2]$ Expected profits Distribution of expected profits 0 [0.419, 0.392] 0.909 (45.4%, 9.8%, 44.8%) 1 [0.548, 0.362] 0.790 (1.1%, 42.8%, 37.5%, 13.4%, 5.1%)

Table 2.  Optimal Pricing and Expected Profit When Customers Are Non-strategic4

 Q $[p_1, p_2]$ Expected profits Distribution of expected profits 0 [0.454 0.357] 0.933 (56.2%, 43.8%) 1 [0.487 0.312] 0.862 (49.8%, 38.7%, 11.5%)

Table 3.  Influence of Consumer Waiting Behavior on Seller Profit6

 Case Ⅰ (%) Case Ⅱ(%) Q $\alpha=0.5$ $\alpha=1$ $\alpha=1.5$ $\alpha=0.5$ $\alpha=1$ $\alpha=1.5$ 0 -2.61 -10.04 -38.74 -4.95 -11.7 -33.31 1 -9.21 -16.73 -40.92 -4.64 -20.52 -71.89 5 7.08 22.32 52.68 -12.30 -17.79 -43.36
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Figures(6)

Tables(3)