Research On Pricing Strategy Considering Reference Price Effect And Strategic Customers'Behavior

When a firm promotes a product,it usually compares it with past prices or compares it with other competitive firms to show consumers that it is more favorable to purchase their own products.Today,as information acquisition becomes more and more convenient,consumers can also obtain the historical price of the product and the sales price of other merchants at the same time.Instead of simply making decisions based on a certain reference price,a more rational choice can be made.In addition,after many times of learning,consumers have gradually become familiar with the pricing routines of promotions,such as "high-low" pricing institutions,that is,using the reference price effect to bring the transaction utility to consumers,thereby achieving higher profits.As a result,consumers are becoming smarter and starter,they will strategically choose the buying opportunity to maximize their utility.Even more rational consumers cannot be influenced by the reference price effect,which brings new challenges to the pricing of enterprises.Consumers tend to compare the current price with historical prices of the same brand and selling prices of other brands,when they make purchase decisions.The intertemporal and horizontal reference price effect(RPE),formed by the historical price and the competitor's price,respectively,should be taken into account when developing optimal pricing strategies over several periods and in a competitive environment.This paper considers a two-period pricing problem with two competing sellers,incorporating both types of RPE.We first develop a duopoly game to study the impacts and interactions of RPE of different types then we study a practice of price commitment when one firm gives up dynamic pricing.We find different types of RPEs have distinct impacts.The intertemporal RPE leads to a Hi-Lo pricing strategy,while the horizontal RPE drives the selling prices of both periods downwards.The intertemporal RPE is weakened by the horizontal RPE,while the horizontal RPE is weakened(intensified)in the first(second)period as the intertemporal RPE becomes stronger.Also we find price commitment is not beneficial.On the contrary,both firms may be worse off if one firm makes price commitment.Furthermore,if one firm decides to make price commitment he should announce the selling price well in advance.This paper examines the impact of strategic consumers on firm pricing and profits when they are not affected by reference prices in a market where strategic consumers and myopic consumers coexist.We have established a two-stage dynamic pricing model to explore the impact of different factors on firm pricing.We find that the pricing strategy of a company depends mainly on the level of consumer patience.Consumers have a low level of patience,and it is relatively easy for companies to induce consumers to buy in first period,and they can profit by expanding the price gap.When consumers have high levels of patience,it is difficult for companies to induce consumers to buy in first period,only to increase the price gap and obtain high profits from myopic consumers with high-value.Then we explored the impact of price commitment on companies.We have found that when consumers' patience level is low,companies promise to cut prices in the future without hurting the profits of the company.Finally,this paper investigates a two-stage dynamic pricing strategy when the seller faces strategic consumers in the presence of a reference effect.We show that although strategic consumers weaken the flexibility and advantage of the dynamic pricing strategy,it can be alleviated by the positive impact of the reference effect.The seller's prices may be non-monotone with respect to the coexistence of the two effects.We then extend our study from a centralized system to a decentralized system and find that double marginalization is effectively weakened by reference effect.Interestingly,the centralized structure may not always be optimal relative to a decentralized structure,indicating a non-monotone relationship between the wholesale price and the profit in decentralized structure.