 Dynamic pricing in the presence of consumer inertiaLi Zhao, Peng Tian and Xiangyong Li Omega, 2012, vol. 40, issue 2, 137-148 Abstract: Customer behavior modeling has gained increasing attention in the context of dynamic pricing. As an important behavior phenomenon, consumer inertia refers to consumers' inherent tendency of purchase procrastination and may induce consumers to wait even when immediate purchase is optimal from an objective perspective. This paper studies a dynamic pricing problem for a monopolist firm selling perishable goods to consumers who may be influenced by inertia. We formulate this problem using the finite-horizon dynamic programming approach and derive the optimal dynamic pricing policy. We demonstrate that consumer inertia produces negative effects on firms' expected revenues and optimal prices, which are monotonically decreasing in both inertia depth and breadth. Through numerical illustrations, we further show that the marginal effects of inertia depth on optimal prices and expected revenues are decreasing, whereas the marginal effects of inertia breadth are increasing. Finally we propose some suggestions for firms to influence the level of consumer inertia. Keywords: Dynamic; pricing; Customer; behavior; Consumer; inertia; Dynamic; programming; Multinomial; logit; model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:40:y:2012:i:2:p:137-148 Ordering information: This journal article can be ordered from Access Statistics for this article Omega is currently edited by B. Lev More articles in Omega from Elsevier |
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