Pricing strategy for perishable food considering consumer's fairness perception

Abstract

The purpose of this study is to develop a multi-period pricing strategy for perishable food under the consideration of consumers' fairness perception. Perishable food refers to food whose value are decreasing with time goes by, and might become even negative in some circumstance. Many companies and researchers realized that perishable food pricing is of great importance that would influence not only the direct revenues but also the consumers' satisfaction and retention in the long run, in addition to avoid extravagance. This paper comes up with a theoretical model and three hypotheses on the basis of food freshness and inventory availability. A laboratory experiment is designed and conducted within human subjects to justify the feasibility and effectiveness of the proposed theoretical model and the hypothesis. The experiment results justified: first, if the retailer adopted differential pricing strategy on the basis of the deteriorating rate and inventory availability, and set reasonable amplitude of price change, the consumers' price fairness perception in different selling seasons can be ensured; second, with the declining of perishable food's freshness and inventory availability, the higher average perception utilities and purchasing behaviors of consumers appears in different selling seasons towards the products with different values. The findings suggest that food retailers can enhance consumer satisfaction by offering a differential pricing strategy, and adopting step by step discounts performs better than the unchangeable fixed retail price. The findings in this study are significant since they serve as the first step in measuring discriminatory pricing and prove that it is feasible and workable in real life perishable food pricing context, and also provide better trade-offs between consumers' fairness perception and retailer's revenue in the long run.