Two-Period Pricing with Selling Effort in the Presence of Strategic Customers

Feng Yang (), Junjun Kong () and Minyue Jin
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Feng Yang: School of Management, University of Science and Technology of China, No. 96 Jinzhai Road, Hefei, Anhui 230026, P. R. China
Junjun Kong: School of Management, University of Science and Technology of China, No. 96 Jinzhai Road, Hefei, Anhui 230026, P. R. China
Minyue Jin: School of Economics and Business Administration, Chongqing University, China, 174# Shazhengjie Street, Shapingba District, Chongqing 400030, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2019, vol. 36, issue 03, 1-21

Abstract: This paper investigates the implications of selling effort upon a monopolistic seller’s optimal pricing decisions and its performance in the presence of strategic customers. In our model, strategic customers can anticipate future price discounts and decide on when to purchase products from the seller over two periods. The direct impact of selling effort is to induce more customers to purchase in the first period. Two pricing policies are under consideration: (i) preannounced pricing under which the seller commits to a price path over two periods in advance; (ii) contingent pricing under which the seller can dynamically set a price in each period. The analytical results demonstrate that preannounced pricing always dominates contingent pricing from the seller’s perspective. Moreover, compared with the results under contingent pricing, selling effort is enhanced but market demand is shrunk under preannounced pricing. Through sensitivity analysis, we further find that when customers become more willing to postpone their purchases to the second period, the seller should reduce its selling effort in the first period if the demand-enhancement effect of selling effort is sufficiently low.

Keywords: Strategic customers; selling effort; preannounced pricing; contingent pricing (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S0217595919500118

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