Pricing Decision Of Short-life-cycle Product Considering Pre-order Cancellation

With the upgrading of consumption structure and the development of science and technology,the life cycle of the products are more and more shortened.Faster product updates are pushing short-life-cycle products become a trend.In the process of short-life-cycle product circulation,the value declines rapidly,the depreciation rate is serious,and the behavior of consumer becomes more unpredictable,which cause the sales opportunity has gone in a blink.Retailers must create value within the limited sales time.Therefore,the presale strategy is often used in the sales process of short-life-cycle products.The advance sale of short-life-cycle products can,on the one hand,increase exposure of the products and attract more attention;on the other hand,make some early consumers enter the market for pre-sale discount,and predict the sales of goods by bookings.Thereby,retailers can determine the inventory.However,if the retailer allows the consumer to cancel the order under certain conditions,the consumer's cancellation of order during the sale will have a negative impact on the estimation of the demand information,the risk of inventory will be increasing.This paper is intended to find the best sales strategy that retailers should take for short-life-cycle products under different sales conditions.This paper focuses on the pricing decision of short-life-cycle product considering pre-order cancellation.There are two questions,one is whether or not the retailer allows the consumer to cancel the order,the other is what price should the retailer make about pre-sale and the penalty for the cancellation of order.Considering pre-sale price,inventory and penalty for cancellation of order as variables,this paper establishes the mathematical model of pre-sale and consumers' cancellation of order using the theory of income management.Combined with the mathematical methods such as expected integral and related theories in the normal distribution newsboy model,this paper carries out the numerical analysis of the model,and compares the advantages and disadvantages of the two models,which provides guidance for retailers to make decisions when they are in the market,and provides a mathematical basis for the formulation of pre-sale discounts and return costs.This paper solves the optimal order quantity,the optimal pre-sale price,the optimal return price and the optimal expected profit the retailer should take in two kinds of pre-sale cases.The results show that the optimal pre-sale price of the retailer is the inverse function of the probability of external temptation factor;the smaller the cost,the more expected profit the retailer can obtain by taking pre-sale measures.In the refundable pre-sale strategy,the retailer expects that the profit is a concave function of the order quantity and has an extreme value.In the refundable pre-sale strategy,the optimal return price is similar to the cost.Finally,the cost of product and the expected variance of consumer valuation are analyzed numerically,and the strategies for retailers in different situations are given.Considering pre-order cancellation,there are still many deficiencies in this study on the pricing decision of short-life-cycle product.For example,this paper only considers the impact of returns on retailers' decision-making in the pre-sale stage.In reality,returns are often accompanied by the whole life cycle of products.From the consumer's point of view,this paper assumes that consumers are homogeneous,but different consumers often have different risk preferences.Therefore,research will deeply consider the return behavior of the sales stage and the distribution of risk aversion in the future.