Strategic Consumer Response to Dynamic Pricing of Perishable Products

Minho Cho (), Ming Fan () and Yong-Pin Zhou ()
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Minho Cho: Michael G. Foster School of Business, University of Washington
Ming Fan: Michael G. Foster School of Business, University of Washington
Yong-Pin Zhou: Michael G. Foster School of Business, University of Washington

Chapter Chapter 17 in Consumer-Driven Demand and Operations Management Models, 2009, pp 435-458 from Springer

Abstract: Abstract Dynamic pricing is a standard practice that sellers use for revenue management. With the vast availability of pricing and inventory data on the Internet, it is possible for consumers to become aware of the pricing strategies used by sellers and to develop strategic responses. In this chapter, we study the strategic response of consumers to dynamic prices for perishable products. As price fluctuates with the changes in time and inventory, a strategic consumer may choose to postpone a purchase in anticipation of lower prices in the future. We analyze a threshold purchasing policy for the strategic consumer, and conduct numerical studies to study its impact on both the strategic consumer’s benefits and the seller’s revenue. We find that in most cases the policy can benefit both the strategic consumer and the seller. In practice, the seller could encourage consumer waiting by adopting a target price purchasing system.

Keywords: Arrival Rate; Dynamic Price; Price Volatility; Limit Order; Revenue Management (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1007/978-0-387-98026-3_17

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