Abstract
This paper presents the latest progress on pricing and revenue management. Consumer's switching purchase behavior occurs frequently in perishable goods retail market, and we propose a two-period dynamic pricing model among online and offline retailers under heterogeneous purchase behavior of myopic consumers and strategic consumers. Through equilibrium solution and analysis, this study discusses the optimal pricing strategy under the influence of the service perception factor and the proportion of two kinds of consumers. Moreover, this paper analyzes the effect of three pricing strategies on profits to prove the effectiveness of price matching strategy implemented by offline retailers. The results show that the strategic behavior of heterogeneous consumers does not always have a negative impact on the profits of two retailers. The offline retailers can strategically choose to set higher prices to increase profits, and online retailers can also reduce the impact of heterogeneous consumer behavior by disclosing product attribute information. It is unwise for online retailers to take the initiative to match the price set by the offline retailers. In contrast, offline retailers can achieve a win-win situation for both retailers by matching the price of the online retailers actively.
Highlights
The development of e-commerce technology has promoted the rapid rise of online stores, and the perishable retail industry has formed a dual market of offline and online stores
SURVEY OF EXISTING LITERATURE The paper is related to three research streams: consumers’ choice between offline and online retailers, pricing equilibrium under duopoly competition, and the impact of dynamic pricing and price matching strategy on competition and heterogeneous consumer behavior
When the online retailer chooses the option of price matching, it gives strategic consumers a price that matches the price of the offline retailer, so that they will not switch to the offline retailer in the second period, and continues the usual price to those myopic consumers
Summary
The development of e-commerce technology has promoted the rapid rise of online stores, and the perishable retail industry has formed a dual market of offline and online stores. A study showed that among the surveyed consumers, 65 percent of them first search for product information on the Internet and buy offline [1] Another theoretical model was tested with a sample of 337 consumers. Some retailers through dynamic pricing to influence consumers’ purchase decision in response to heterogeneous consumer behaviors. Empirical research shows that consumers’ purchase decisions in such industries as consumer packaged goods, college textbooks, and apparel are forward-looking [5]–[7] They choose to wait or compare prices and switch to other retailers. To study the effect of the switch behavior on retailers’ pricing strategies and profits, some researchers [9]–[11] analyzed stylized economic models that incorporates uncertainty in consumers’ valuation of the product, captures the heterogeneity among consumers in their inclination to purchase online. By contrasting these two widely used pricing strategy, we characterize the conditions under which strategy is more profitable when consumers are affected by both strategies
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