Dynamic pricing helps the firm to exploit consumers surplus, but it also creates an incentive for strategic consumers to wait for lower price. This paper studies the optimal pricing and stocking decision of a fashion-like seasonal good in a market containing both strategic and nonstrategic consumers. We compare three strategies: rationing dynamic pricing, unrationing dynamic pricing and static pricing. When price is exogenous, rationing dynamic pricing is optimal only if there is a sufficiently large segment of high-valuation consumers and the proportion of strategic consumer is medium. When price is endogenous, rationing dynamic pricing is always inferior. Everyday low pricing outperforms while the number of strategic consumer is small, otherwise unrationing dynamic pricing is optimal.
XU Xian-Hao
, CHEN Wen
, Shen-Gu-Wen. , {{custom_author.name_en}}.
EVERY DAY LOW PRICING OR DYNAMIC PRICING IN THE PRESENCE OF STRATEGIC CONSUMERS. Journal of Systems Science and Mathematical Sciences, 2011, 31(10): 1163-1173 https://doi.org/10.12341/jssms11696