Pricing On Perishable Products Under ABD Model

With the acceleration of technique and scientific development, more competition in market, shortening of product life cycle and quicker updating of products, people tend to use more and more perishable products nowadays.ABD (Advanced Booking Discount)mode is a promotion strategy of perishable goods. There are many applications of ABD, such as moon cakes of mid-autumn day and movies about to be shown to the public. ABD mode works this way: retailers offers some discounts when customers made orders before sales hot season and pay some advanced payments. Products will not be delivered during booking period and retailers should ensure the customers get the goods they ordered in hot seasons. In ABD mode, cancellations of orders and returning of goods are not allowed. Other customers who did not order in advance can only buy the products without discounts at regular seasons and also they have to take the risk of running our of goods. Companies' return has been greatly improved with the wide application of ABD nowadays. ABD mode can extend the selling period of products, improve the accuracy of demand forecast and reduce cost caused by unsalable products or out of stock. Advanced payments in ABD can improve the cash flow of retailers. Obviously, ABD mode can protect companies from risk, thus helping retailers win the fierce competition. It's important both theoretically and practically to further study ABD sales mode and its application.Revenue management is a new management technique, and as a very important branch among its three major branches, the pricing have being paid more and more attention nowadays.This article studies pricing strategy under ABD mode in a competitive environment, using revenue management together with the background of market practice.The author firstly organizes the literature on revenue management in a simple-to-complex manner. The relevant theories were provided to form theoretical background of the rest of the article.Then the author assumes a duopoly market of perishable products and divides the sales period of perishable products into booking period and regular selling period. The pricing in regular selling period is closely related to the discount rate in booking period. As to the problem of two-stage decision sequence, chapter 3 discusses three situations when two oligarchs adopting ABD mode: neither adopt ABD, one adopts one does not and both adopt ABD. The article is concerned about how the profitability differentiates and how to set the right price under three situations. In particular, the author studied the third situation. Using dynamic planning, the author has solved the problem of two-stage pricing under duopoly, made clear of the relations between pricing strategies of the two stages and reached sub-game perfect Nash-equilibrium in booking period.In chapter 4, the author undertake a simulation of two oligarchs both adopting ABD mode on the basis of chapter 3. Then by using the diagram and comparative analysis, the author studied the mechanism of different factors affecting pricing strategy, such as price sensitivity, comparative price sensitivity, the degree of risk aversion, the degree of customer disloyalty. They all influence the retailer profit and pricing strategy. Chapter 4 offers a lot of intuitive conclusions.The analysis mentality as well as the conclusions of this article can provide reference to other studies on pricing under advanced payments. The conclusions of this article also can help decision-makers make better decisions.