Managing an expiring product under a market that is heterogeneous in the sensitivity to the retailer's reputation

Avi Herbon

International Journal of Production Economics, 2021, vol. 232, issue C

Abstract: Reputation plays an important role in assuring product quality in markets where consumers can only imperfectly judge the quality before consumption. For the retailer, reputation is a valuable asset, as consumers are more likely to trust a company that has a sound reputation. The existing literature on inventory management rarely considers demand as being affected by reputation. In this study, we develop an operational research approach in which the demand rate is affected by the price, remaining shelf-life, and retailer's reputation, as well as by the heterogeneity of consumers in terms of their sensitivity to the latter two factors. We represent the retailer's reputation by the overall average freshness level of the products sold on his shelf (obtained from records), while the retailer's objective is to maximize his profit.

Keywords: Heterogeneous market; Optimal pricing; Expiring inventory; Reputation (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:232:y:2021:i:c:s092552732030339x

DOI: 10.1016/j.ijpe.2020.107990

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