Optimal Dual-Channel Dynamic Pricing of Perishable Items under Different Attenuation Coefficients of Demands

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.