Abstract
With the development of product development technology and the rapid rise of online retailing, the market competition becomes increasingly fierce. Based on consumer utility function, this article established a two-stage dynamic pricing model and discussed pricing strategies under consumer behavior and market competition. Findings indicate that product quality difference and consumer valuation decreasing coefficient determine the order of the consumer purchase decisions. The firm who provides lower-quality products suffered more loss than the firm who provides high-quality products.
Highlights
With the development of Internet, competition between firms becomes increasingly fierce
Literature related to this paper is dynamic pricing with competition in revenue management
Due to the difficulty of multi-stage dynamic programming solving, this paper study the dynamic pricing in the two stages
Summary
With the development of Internet, competition between firms becomes increasingly fierce. Replacement of product is becoming faster and faster, consumers are becoming more and more “smart”. Firms consider consumers’ behavior, and consider the impact of competitors’ pricing strategies. Literature related to this paper is dynamic pricing with competition in revenue management. Chen and Zhang found dynamic pricing improved revenue of the two firms, and social welfare is improved [5]. There exist two firms whose product qualities are different. According to consumers’ different utility, we establish demand and revenue function and obtain optimal pricing decision. (2015) Dynamic Pricing of Perishable Products with Competition.
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