Optimal ordering and pricing policies in managing perishable products with quality deterioration

Jing Chen, Zhongwei Tian and Wei Hang

International Journal of Production Research, 2021, vol. 59, issue 15, 4472-4494

Abstract: We consider a monopoly grocery retailer that procures from a far away supplier a batch of a perishable product. A random part of this batch has quality deterioration before entering the market during a long-distance transportation. With the stochastic freshness-keeping ratio, i.e. the ratio of products preserved in high quality after transportation, the grocery retailer has to determine its ordering batch size and selling prices to alleviate cannibalisation caused by quality segmentation. We find that when the realised size of the high-quality product exceeds half of the maximum market potential after the transportation, it is optimal to sell high-quality products only to avoid cannibalisation. Otherwise, it is optimal to sell the high-quality and low-quality products simultaneously to extend sales. We also find that, when more customers arrive or the difference of two quality levels becomes larger, it is optimal to order more to gain more profit. Finally, we investigate the role of freshness-keeping effort on the optimal pricing and ordering policy and further characterise the optimal freshness-keeping effort under various structures of the freshness-keeping cost.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/00207543.2020.1766715 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:tprsxx:v:59:y:2021:i:15:p:4472-4494

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TPRS20

DOI: 10.1080/00207543.2020.1766715

Access Statistics for this article

International Journal of Production Research is currently edited by Professor A. Dolgui

More articles in International Journal of Production Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().