Optimal Dual-Channel Dynamic Pricing of Perishable Items under Different Attenuation Coefficients of Demands
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ISSN: 1004-3756 (paper), 1861-9576 (online) CN 11-2983/N
Optimal Dual-Channel Dynamic Pricing of Perishable Items under Different Attenuation Coefficients of Demands Zhenkai Lou,a Fujun Hou,a Xuming Loub a School
of Management and Economics, Beijing Institute of Technology, Beijing 100081, China [email protected], [email protected] () b School of Economics and Management, Xi’an University of Posts and Telecommunications, Xi’an 710061, China [email protected]
Abstract. This paper discusses optimal dual-channel dynamic pricing of a retailer who sells perishable
products in a finite horizon. The type of product which is equipped with different attenuation coefficients of demands on different sales channels is considered. Novel demand functions for the two channels are proposed according to attenuation coefficients of demands, and then a decision model is constructed, which can be handled stage-by-stage. It is shown that the sales price and the sales quantity of the channel which possesses more market shares are both higher than the ones of the other channel at each sales stage. More importantly, by analyzing the reasonability of the obtained solution, a necessary and sufficient condition is proposed to guarantee that both of the two channels will not stop selling through the entire period. We also propose an approach by the elimination method to deal with cases in which some channel stops selling. Further, we demonstrate that the channel which possesses more market shares is the optimal option when only one channel runs. Finally, numerical examples are presented to investigate the change of sales prices of the two channels under different market potential demands. Keywords: Dual-channel pricing, multi-stage pricing, attenuation coefficients of demands, stop selling
1. Introduction The concept of perishable product was first proposed to describe time-sensitive goods (Weatherford and Bodily 1992). Many industries, retailers, and service providers raise their revenue through dynamic pricing when facing the problem of selling perishable products (Chatwin 2000). In practice, the quality of perishable product often varies with time (Liu et al. 2015, Dye and Yang 2016), thus the value of perishable product generally can be expressed as a function of time accordingly. On this premise, the purchase price is always priceand-time dependent (Ahmadi et al. 2020). With the development of Internet technique, more and more people prefer to purchase through e-commerce platforms. Owing to this, many manufacturers redesign their traditional channel structures by engaging in platform channels (Chiang et al. 2003). The sell-
ing channel brought by the Internet endows the manufacturers with more opportunities for cost savings, revenue growth, and expansion to new market segments (Chen and Hu 2012). In the physical store, consumers are endowed with chances of selection and immediate acquisition. By comparison, the e-commerce platform offers home delivery service but it takes some time to distribute products. Therefore, different sales channels have diffe
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