Online hot selling period and its impact on e-retailer’s pricing strategies

The express delivery industry is often overloaded in some hot online selling seasons, which causes consumers’ dissatisfaction. Under such a circumstance, the e-retailer can utilise two opposite strategies, i.e. to set-up either a low price with a pre-announced markdown pricing (PMDP) strategy, or a high price with a pre-announced markup pricing (PMUP) strategy for the hot selling period. As both the prices and the express service quality are different between the regular period and the hot selling period, consumers can strategically choose their purchase time, which will in turn influences the e-retailer’s pricing strategy. To investigate under what condition one pricing strategy will dominate the other, we propose a two period pricing model in which the selling season are divided into regular and hot selling period, and all consumers are assumed to be strategic. The e-retailer determines the prices over the two kinds of periods to maximise its profit. The comparison shows that a PMUP (resp. PMDP) strategy is preferred when the overloading degree in the hot selling period is slight (resp. heavy). Furthermore, we extend our model by incorporating the competition of traditional retailers.     

需求不确定下考虑顾客策略行为的易逝品定价策略

在市场需求不确定且顾客具有策略行为时，研究易逝品厂商动态定价和价格承诺策略。通过建立厂商和顾客的不完全信息博弈模型，分析了两竞争厂商在2种定价策略下的精炼贝叶斯均衡，求得了均衡定价和期望收益。利用数值分析进一步比较2种定价策略的最佳适用范围，并讨论了需求预期、顾客策略程度和顾客购买意愿对均衡结果的影响。研究表明，在动态定价策略下，当市场处于适度竞争时，顾客策略程度越大，厂商收益越大；顾客购买意愿适中时，动态定价策略更优；顾客策略程度适中，或顾客策略程度较大且需求预期也较大时，价格承诺策略更优。     

Modeling the design quality competition for durable products

In this paper we model the design quality competition in durable product markets. We use a duopolistic non-cooperative game theoretic framework. Each firm controls the design quality level and the price of its product. The resulting control theoretic model is solved under certain functional assumptions to describe the Nash equilibrium design quality and pricing strategies of the two competitors. We compare open and closed loop design quality and pricing strategies. We use an extensive set of numerical experiments to investigate the effects of various parameters of the model on the optimal policies. We conclude with a brief summary of our results and some useful managerial insights derived from the model.     

Myopic vs. far-sighted behaviours in a revenue-sharing supply chain with reference quality effects

In this paper, we consider a dynamic supply chain where a manufacturer produces and distributes a featured product through an exclusive retailer to end consumers. The manufacturer decides the product quality and wholesale price, while the retailer sets the retail price in the presence of a revenue-sharing contract and consumers’ reference quality effects. The objective of this study is to investigate the impacts of myopic behaviour regarding the reference quality on the product quality and pricing strategies and profits of both members. Our results suggest that the manufacturer’s myopia leads to a higher quality, higher price strategy and a higher quality–price ratio which benefits consumers. Meanwhile, relative to the far-sighted behaviour, myopia results in a more quality-sensitive but less price-sensitive market demand. What’s more, we find that the manufacturer is apt to act in a far-sighted way, but the retailer isn’t always willing to cooperate with a far-sighted manufacturer. Taking myopic strategies for both members is likely to gain a high profit of the whole supply chain for a relatively high marginal contribution of product quality on demand and a relatively low revenue-sharing proportion.     

Dynamic pricing with stochastic reference effects based on a finite memory window

Inspired by the latest empirical studies, we propose a new updating model for reference prices by assuming that consumers’ memories are limited and their recall of previous prices obeys a first-order Markov stochastic process. We investigate a dynamic pricing model with stochastic reference effects and finite memory. Consistent with the exponential smoothing model, we indicate that reference effects lead to monotonic convergence of the optimal price path to an expected steady-state price. The steady-state range tends to widen as consumers become loss-averse. The results of our numerical experiments differ from findings of certain models under the assumption of stochastic recall memory of consumers. The optimal price path fluctuates consistently around the steady state instead of remaining constant. The effect of the first price on the memory window and long-term profits decreases as the length of memory window increases.     

考虑产品退货的制造商质量与服务决策研究

考虑由一个制造商与消费者组成的二级网购服务供应链,在产品质量、市场需求、价格等相关因素影响下,构建了网络直销的产品退货和服务水平决策模型。研究了这些相关因素的敏感系数变化对产品退货量和制造商最优决策的影响,并通过算例分析验证对比。结果表明,随着价格敏感系数的提高,制造商的最优价格、最优质量水平和最优服务水平均降低,产品退货量增多;随着服务水平敏感系数或质量水平敏感系数的提高,制造商的最优价格、最优质量水平和最优服务水平均提高,而产品退货量减少。     

Two strategies for dynamic perishable product pricing to consider in strategic consumer behaviour

The study investigates two dynamic pricing strategies, namely posterior price matching (PM) and delay posterior price matching (DPM). These strategies are used by sellers to consider consumer behaviour in a market with several types of consumers. We analyze reduction season price, purchasing equilibrium and regular selling season price using equilibrium theory and backward induction method. A comparison of these two strategies indicates that both PM and DPM enable sellers to increase price in a regular selling season. Hassle cost and valuation differences between high- and low-end consumers influence the profits and decisions of the seller. PM is the best choice when valuations of low- and high-end consumers vary significantly. When the strategic consumer delaying fraction is small, the advantages of PM are more evident than those of DPM. However, DPM is the best choice when the difference between the valuations of low- and high-end consumers is small, and the strategic consumer delaying fraction is large. An increase in hassle cost also affects the seller’s strategy choice and profits; this effect decreases as strategic consumer delaying fraction increases.     

The value of updated information on future price behaviour

This paper studies the value of information on future price behaviour. We consider a one-period inventory modelling framework with random period length and two order opportunities. The selling price is determined dynamically and the demand is price-sensitive. The second ordering-pricing decision reflects the updated information on future price behaviour on supply chain flexibility. We consider three models with different levels of flexibility: the static model, the quantity flexible model and the combined quantity and timing (fully) flexible model. We compare between the values of three different features in the supply chain: updated information on price behaviour, dynamic pricing and supply flexibility. And we demonstrate the effect of holding cost and demand uncertainty on these three values. We also consider a specific condition with fixed selling prices. We give explicit analysis on the optimal order decisions, and analytically show the impact of information and quantity flexibility on the optimal order decisions.     

Joint pricing and advertising strategy with reference price effect

Consumers are susceptible to reference price effects when they make purchase decisions for a certain product. Meanwhile, the sales price and advertisement are the determinable factors that have impact on consumers’ reference price which are also fundamental marketing strategies. Therefore, how to determine an appropriate sales price and advertising effort level to maximise firms’ profits is an essential task. A joint pricing and advertising problem for a monopolistic firm with consideration of reference price effect is investigated, where consumer demand rate is price-sensitivity and depends on the gap between the sales price and the reference price in consumers’ mind. An optimisation model is established to maximise the firm’s total profit by making a joint pricing and advertising strategy. The static and dynamic joint strategies are obtained by applying Pontryagin’s maximum principle. Results show that the dynamic strategies dominate the static ones. Furthermore, the dynamic pricing and dynamic advertising strategies are strategic complements. Additionally, the length of the sales period plays a key role in determining the superiority of the two dynamic strategies. Specifically, a relatively short sales period highlights the value of the dynamic advertising while a long sales period strengthens the function of the dynamic pricing.     

Integrating the customers’ perceived risks and benefits into the triple-channel retailing

Multiple channel retailing and channel selection strategy have become key issues for many corporations to place themselves at the heart of a new era of retailing. This paper studies a triple-channel system in which a manufacturer operates a conventional channel, a direct online channel, as well as increases its online presence with an online shopping platform. It also takes the heterogeneity of consumers’ price sensitivity and channel preferences into account. It highlights that the perceived risks and perceived benefits are aggregated into an inhibitor or activator entering the customers’ acceptance of triple channels and further affecting their purchasing decisions. Three cases are discussed to investigate the demand distributions, the profit behaviours, the optimal pricing strategies and the channel selection strategies. Theoretical analysis is further validated by a case study with the aid of agent-based modelling. Sensitivity analysis demonstrates that two acceptance indices – respectively, regarded as the consumers’ willingness to tolerate the perceived risks of the online channel and approve the perceived benefits from the third-party online platform – significantly govern the total profit in two stylised scenarios. This study schematically characterises the structure of demand distributions, helps the corporation to discern consumers’ channel choices and then focus its marketing efforts towards more profitable customers and strategic channel structures. Furthermore, some implications are outlined for the optimal supply chain designation decision.     

Optimal two-level piecewise-constant price discrimination for a storable perishable product

Price differentiation over time is an additional policy that firms might consider when determining prices for perishable products. The common policy of a fixed price regardless of freshness might result in leaving some expired inventory unsold. Price differentiation can impact the demand for perishable products, which declines as the expiration date approaches. We develop an optimisation model with the goal of evaluating the monetary effectiveness of the strategy of simultaneously combining price discrimination across heterogeneous consumers with price differentiation over time for perishable inventory under separable multiplicative demand factors of price and time. Necessary optimality equations are derived, and their solutions are proved to constitute a unique global optimal solution. It is proved that an optimal pricing policy is to implement price discrimination with respect to consumers’ sensitivity to freshness, while dynamically changing the price over time, starting with a lower price at the early stages of the product’s shelf life and increasing it at a later stage. The monetary benefit that the retailer and consumer can derive from the suggested pricing policy is evaluated by comparing the model to other models in which price discrimination or dynamic pricing are not implemented. A numerical example that illustrates the significance is introduced. From the analysis of a numerical illustration of the model, it is concluded that a dynamic price discrimination policy can be approximated by an identical-to-all dynamic pricing policy in order to maximise the retailer’s profit and thus, mitigate the retailer’s risk from failing in the process of implementing price discrimination.     

网络零售商产品与运费联合定价的优化决策研究

消费者网络购物对运费的认知和商家的偏好存在差异。通过消费者的购买行为分析和效用函数的刻画,研究网络零售商在进行产品与运费联合定价时捆绑定价和分割定价的优化决策问题。讨论商家之间价格竞争的组合形式,提出最优定价存在的情形选项,论证价格决策的边界和适用条件,揭示商家之间采用捆绑定价的对称竞争均衡具有稳定性,及其不同均衡条件下商家利润的相对大小规律。研究结论表明,价格决策的选项取决于商家的产品成本高低,在产品成本给定的条件下,每种价格决策的边界依赖于市场中消费者的属性特征,即运费存怀疑的消费者比例,以及消费者对商家的偏好程度。     

考虑信息披露的双渠道供应链两周期定价策略

在一个含有线上直销渠道的双渠道供应链中,考察当消费者注重产品体验时,信息不披露和信息披露两种模式下制造商、零售商两周期的定价策略。研究发现:消费者对产品体验为高的概率和信息披露对提升制造商和零售商的议价能力都存在正向的作用;信息披露使实体店第二期的需求对前期需求更加敏感,而对第二期价格及成本的敏感性下降;不论信息是否披露,第一期实体店定价总高于网店定价,但当消费者体验产品为高的概率足够大时,网店在第二期可以采用高于实体店的定价策略,且信息披露可以使网店在第二期有更多的可能制定高于实体店的定价;信息披露使得制造商在两期内都可以获得更高的收益,而零售商的收益变化与披露成本有关,且零售商在第一期受益的可能性更高。     

Dynamic pricing vs. acquiring information on consumers’ heterogeneous sensitivity to product freshness

We propose a model of an inventory system in which a perishable product is periodically replenished, and the retailer is unaware of consumer heterogeneity in consumers’ sensitivity to freshness of a perishable product with a fixed shelf life (though it exists). Using an analytical approach, we optimally solve the problem and evaluate the extent to which unawareness is likely to detract from a retailer’s profit and the extent to which it is likely to affect the price that consumers pay. In addition, we evaluate the conditions in which a dynamic pricing policy is beneficial either to the retailer or to the consumer, as compared with a static pricing policy. It is proven that the retailer should assign products a lower price at the early stages of their shelf life and then raise the price as the products approach expiration. A numerical illustration combined with sensitivity analysis demonstrates the applicability of the modelling approach. Key parameters such as volatility of consumer sensitivity to freshness and the retailer’s estimation regarding consumers’ sensitivity are investigated. A conclusion is that, in monetary terms, it is preferable from the retailer’s perspective to invest in dynamic pricing technology rather than in technologies for gathering information on consumers’ purchases.     

Optimal piecewise-constant price under heterogeneous sensitivity to product freshness

When perishable products are priced uniformly, regardless of the amount of time remaining until expiration, consumers may gravitate towards fresher products, leaving some inventory unsold. This research considers dynamic pricing policies as well as replenishment policies in the context of perishable products with a fixed shelf life. Consumers are assumed to be heterogeneous in their sensitivity to freshness, i.e. their willingness to pay more for fresher products. We develop a model for identifying an optimal (profit-maximising) dynamic pricing policy and for evaluating the extent to which both the retailer and the consumer benefit from the implementation of a dynamic pricing policy as opposed to a static policy. The model assumes that the retailer is able to utilise knowledge regarding the heterogeneous characteristics of incoming customers (e.g. the retailer can gather specific information about customers’ historical purchases). Unexpectedly, it is proven that in an optimal pricing policy, the retailer should assign a lower price to fresher products and then raise the price as the products approach expiration. A numerical illustration shows that profits are strongly influenced by the volatility of consumer sensitivity to freshness; specifically, this variable has the potential to reduce optimal profits by up to 8%.     

Dynamic pricing for multiple class deterministic demand fulfillment

We consider how a firm should allocate inventory to multiple customer classes that differ based on the price they pay and their willingness to incur delay in fulfillment of their demand. The problem is set in a deterministic demand, economic-order-quantity-like environment with holding, backorder, lost demand and setup costs. The firm either fulfills demand or offers a price discount to induce the demand to wait for fulfillment from the next reorder. We determine the optimal policy and discuss how changes in various parameters affect profitability, customer service, and operational measures such as order frequency and base stock levels. We compare the results to a policy that only rations inventory without dynamic discounting and to a policy that only provides discounts. Through the comparison, we observe that dynamic pricing can be seen as a combination of a pricing mechanism which determines demand and an allocation mechanism that differentiates between customer classes, serving each ones needs. We show that if lower-value customers are distinguished by accepting reduced service, it is possible that both high and low-value customer classes see better levels of service under the optimal policy than under a discounting only policy. In addition we demonstrate the applicability of the results to a stochastic version of the problem.     

不同公平关切下的供应链定价决策分析

为了比较研究零售商绝对公平关切和相对公平关切下供应链的定价策略与利润,建立一对一两级供应链Stackelberg博弈模型,采用逆推法进行求解。数理推导结果表明：两种公平关切模型下,零售商的公平关切均不会影响其定价策略,但会削弱制造商的批发价格,从而导致零售商获取更多的供应链利润;另外,受零售商公平关切程度的影响,两种公平关切下制造商的批发价格及双方利润表现出明显的分段差异性。     

Optimal pricing strategy for the perishable food supply chain

This research investigates the optimal pricing strategy for the perishable food supply chain. Using the setting of a two-echelon supply chain including a supplier and a retailer, we apply the game theory approach to derive the equilibriums for both a single pricing strategy and a two-stage pricing strategy. Through a comparison of the equilibriums, we explore how the two pricing strategies affect the supply chain’s decisions and supplier’s and retailer’s performance individually and collectively. The results of the analysis show that the optimal choice of pricing strategy depends on the price markdown cost and its relationship with the two critical thresholds that are determined by a combination of factors including the potential market size, the price and quality sensitivity factors, the initial quality, the unit product cost, and the quality deterioration rate.     

Channel management and product design with consumers’ probabilistic choices

In this paper, we study how a seller should design the prices and qualities of products or services offered in both a direct channel and an indirect channel when facing consumers with probabilistic purchasing behaviour. We first consider three schemes under personalised offering: independent pricing, revenue sharing and profit sharing. We show that, in the independent pricing scheme, the seller can achieve the same profit using both channels as using only the direct channel. In the revenue sharing scheme, however, the seller’s channel strategy depends on consumers’ sensitivities on the cross-channel differences in both price and quality. Finally, the quality inefficiency in the second scheme can be eliminated in a profit sharing scheme. We then study the scenario in which consumers are heterogeneous with privately observed sensitivities, and show that it is always optimal to offer a single price-quality plan when both sensitive and insensitive consumers co-exist.