Pricing and inventory strategies under quick response with strategic and myopic consumers

Abstract

AbstractWe divide consumers in the selling period into two types according to their purchasing behavior: strategic customers and myopic customers. We address the optimal inventory and pricing decision problem of a retailer considering strategic and myopic consumers with and without a quick response. The results indicate that the retailer should establish a higher price to sell only to myopic customers if there is a sufficient presence of myopic customers in the market, and the retailer should set a lower price to sell to myopic and strategic customers if the number of myopic customers in the market is relatively low. A quick response can decrease the initial ordering quantity and increase the retailer's profit when selling only to myopic customers or selling to both myopic and strategic customers. Moreover, a quick response is beneficial for the retailer to improve the product's retail price if the retailer wishes the two types of customers to purchase the product during the selling period. We also find that the pricing strategy considering strategic and myopic consumers under a quick response will increase profits more than the pricing strategy only considering myopic customers. Finally, numerical experiments are conducted to illustrate and validate the proposed models and provide managerial insights.