DOI QR코드

DOI QR Code

A Study on Multi-Period Inventory Clearance Pricing in Consideration of Consumer's Reference Price Effect

  • Koide, Takeshi (Department of Intelligence and Informatics, Konan University) ;
  • Sandoh, Hiroaki (Graduate School of Economics, Osaka University)
  • Received : 2013.01.31
  • Accepted : 2013.04.30
  • Published : 2013.06.30

Abstract

It is difficult to determine an appropriate discount price for daily perishable products to increase profit from a long-term standpoint. Even if the discount pricing is efficient to increase profit of the day, consumers memorize the sales price and they might hesitate to purchase the product at a regular price the following day. The authors discussed the inventory clearance pricing for a single period in our previous study by constructing a mathematical model to derive an optimal sales price to maximize the expected profit by considering the reference price effect of demand. This paper extends the discussion to handle the discount pricing for multiple periods. A mathematical analysis is first conducted to reveal the properties on an objective function, which is the present value of total expected profits for multiple periods. An algorithm is then proposed to derive an optimal price for asymmetric consumers. Numerical experiments investigate the characteristics of the objective function and optimal pricings.

Keywords

References

  1. Fibich, G., Gavious, A., and Lowengart, O. (2003), Explicit solutions of optimization models and differential games with nonsmooth (asymmetric) reference-price effect, Operations Research, 51(5), 721-734. https://doi.org/10.1287/opre.51.5.721.16758
  2. Greenleaf, E. A. (1995), The impact of reference price effects on the profitability of price promotions, Marketing Science, 14(1), 82-104. https://doi.org/10.1287/mksc.14.1.82
  3. Gimpl-Heersink, L., Rudloff, C., Fleischmann, M., and Taudes, A. (2008) Integrating pricing and inventory control: is it worth the effort?, Business Research, 1(1), 106-123. https://doi.org/10.1007/BF03342705
  4. Kahneman D. and Tversky, A. (1979), Prospect theory: an analysis of decision under risk, Econometrica, 47(2), 263-292. https://doi.org/10.2307/1914185
  5. Koide, T. and Sandoh, H. (2012), A mathematical analysis on daily inventory clearance pricing with consumer's reference price, Industrial Engineering and Management Systems, 11(1), 30-38. https://doi.org/10.7232/iems.2012.11.1.030
  6. Kopalle, P. K., Rao, A. G., and Assuncao, J. L. (1996), Asymmetric reference price effects and dynamic pricing policies, Marketing Science, 15(1), 60-85. https://doi.org/10.1287/mksc.15.1.60
  7. Petruzzi, N. C. and Dada, M. (1999), Pricing and the newsvendor problem: a review with extensions, Operations Research, 47(2), 183-194. https://doi.org/10.1287/opre.47.2.183
  8. Popescu, I. and Wu, Y. (2007), Dynamic pricing strategies with reference effects, Operations Research, 55(3), 413-429. https://doi.org/10.1287/opre.1070.0393
  9. Talluri, K. T. and Van Ryzin, G. J. (2004), The Theory and Practice of Revenue Management, Springer, Heidelberg, Germany.