Food products pricing theory with application of machine learning and game theory approach

Abstract

ABSTRACT Demand for perishable food is sensitive to product prices and is affected by the prices of similar or alternative products. While brand loyalty influences the demand for products, determining a reasonable price requires a precise pricing strategy. In this paper, a pricing model for perishable food is presented in which the brand value of the product and the price of other manufacturers as competitors are considered. To this end, this study first predicts the price of competitors using a combination of optimized Neural Networks and presents an optimized model using a Genetic Algorithm. This algorithm combines a Convolutional Neural Network (CNN), Long Short-Term Memory (LSTM), and a Genetic Algorithm (GA). The proposed model is then used to merge with a game-theory model for the pricing of perishable foods. In this game-theory model, pricing approaches are developed based on identified prices of competitors. In the coordination contract game-theory model, Multi Retailer- one Supplier and Price-sensitive demand of Perishable product are developed with and without quantity discount contract. Obtained results indicate that independent procurement provides retailers with higher profit, while lower profit will be presented when coordination is not considered. Also, with coordination, the ordering cycle increases, and the ordering frequency decrease.