Two-period Pricing For Perishable Product With Reference Price Effects

Perishable goods are always featured with low residual value,short sale period and highly uncertain demand.Retailers with those characteristics have to cut prices throughout the whole life cycle of products and make frequent use of dynamic pricing,instead of the usual pricing strategy,to attract more consumers.Recent years,the development of internet technology provides a flexible and effective environment for retailers to implement dynamic pricing management.However,on the other hand,it also greatly enrich the choice of consumers and exacerbate the market competition.Traditional economic,marketing,and operational models view the consumer as a rational agent who makes decisions based on current prices and commodity value.In recent studies,more and more scholars find that the decisions are also affected by the difference between saling price and the reference price.The current intertemporal pricing of perishable goods with both reference price effect and consumer behavior is still relatively small.To this end,this paper will carry out in-depth study on two-stage pricing strategy of perishable goods with reference price effect in both monopoly market and competitive market.Firstly,taking the reference price effects under consideration,this paper develops a two-stage dynamic pricing model with both strategic consumers and myopic customers to figure out the optimal pricing of perishable goods retailers.According to the different circumstances of commodity perishability,it gives out the corresponding optimal pricing and maximum profits.The analysis shows that when the perishability of goods is obvious,the retailer should keep the same price in two periods.At this point,the consumer's strategic behavior and consideration of the reference price are conducive to business operators.While the perishability of goods is not obvious,numerical experiments show that these behaviors will have a greater impact on business operators.At this point,the retailer should try their best not to give the future sales information of goods to consumers.Instead,in order to curb the waiting behavior of strategic consumers and weaken the reference price effects,the retailer should shorten the difference of price between the two periods.Thus the strategic consumers will be more likely to purchase goods at normal retail stage.Then,taking also into account that consumers are affected by reference price,this paper presents a two-stage duopoly competitive model with traditional consumers and free-riding consumers to analyze the optimal pricing strategy of both entity retailers and online retailers.Numerical experiments show that consumers' free-riding behavior and consideration of reference price will have a greater impact on the entity retailer.In order to weaken the reference price effects,the entity retailer need to guide consumers to pay more attention on internal reference prices.It can also produced exclusive bar code to abandon the behavior of sweeping parity,just like what Best Buy does.While the online retailer should take the opposite strategy.It needs to take full advantage of its lower cost,and turn the advantages of cost control into price advantage.Furthermore,the online retailer should help free-riding consumers focus more attention on external reference prices,rather than internal reference prices.Making full use of lower price to attract consumers and maximize its own profits.