Pricing and inventory strategies for perishable products in a competitive market considering strategic consumers

Lihua Hou, Tengfei Nie and Jianghua Zhang

Transportation Research Part E: Logistics and Transportation Review, 2024, vol. 184, issue C

Abstract: In recent years, the rapid development of information technology has not only given rise to the precise implementation of dynamic pricing but also enabled consumers to strategically time their purchases to pay less. This study explores how sellers counteract the adverse effects of strategic consumer behavior and examines the pricing and inventory strategies of two sellers who sell perishable products from regular selling season to clearance season. Each seller uses one of the two pricing strategies, namely dynamic pricing and price commitment. If both sellers use the dynamic pricing strategy, they may set larger inventories to avoid direct competition in the regular selling season. If a seller can make a credible price commitment, a discounted price slightly lower than the regular price will be pre-announced, by which they are more likely to charge higher prices. If both sellers use the price commitment strategy, they have to commit to lower discounted prices owing to intense price competition. A simultaneous pricing strategy game, in which both sellers can strategically choose dynamic pricing or price commitment, is then conducted. The results show that, in contrast to most existing studies, price commitment may not perform well in a competitive market. By contrast, dynamic pricing demonstrates its benefits to sellers, especially when the loss in product value is insignificant.

Keywords: Strategic consumer behavior; Competition; Dynamic pricing; Price commitment; Inventory decisions (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1016/j.tre.2024.103478

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