Highlights We study strategic consumer behavior and its effect on sellers’ pricing and inventory strategies in a competitive market. We use a horizontal differentiation model to characterize price competition and consumers’ heterogeneous preferences. We consider sellers’ choices regarding two pricing strategies, namely, dynamic pricing and pricing commitment. We reveal that pricing commitment may be detrimental to sellers owing to intense price competition. We show that integrating pricing strategies with inventory decisions can effectively mitigate strategic consumer behavior.

    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.


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    Title :

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


    Contributors:
    Hou, Lihua (author) / Nie, Tengfei (author) / Zhang, Jianghua (author)


    Publication date :

    2024-02-23




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English




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