Abstract
This article mainly considers the impact of cost reduction on price matching strategy when a firm sells products in two periods. The cost reduction in the second period is due to technological advancement and production learning. The market is made up of myopic consumers and strategic consumers. The conclusions show that firm’s optimal profit will decrease with the increase of the fraction of strategic consumers. Besides, when the production learning effect dominates, the firm sells at a reduced price in two periods. When the technological advancement effect dominates, the firm maintains a uniform price for sale throughout the sales period. Finally, both the technological advancement and production learning effect can effectively reduce the loss of profits caused by strategic consumers, and the effect of the technological advancement is more significant.
Highlights
Due to the continuous development of electronic information technology, electronic products are updated quickly
When the technological advancement effect dominates, the firm maintains a uniform price for sale throughout the sales period
This paper mainly studies the impact of cost reduction on the value of the price matching, which mainly considers the impact of three factors on the firm pricing, namely the fraction of strategic consumers, the technological advancement effect and the production learning effect
Summary
Due to the continuous development of electronic information technology, electronic products are updated quickly. Our paper studies the price matching strategy when both strategic consumers and myopic consumers are present in the market, considering the fraction of strategic consumers and the cost reduction which is due to the technological advancement and production learning effect in period 2. Our results indicate that when the firm offers markdown in the second period, if the firm’s technological advancement effect is more obvious, the firm can make decision through the price combination of high price in period 1 and low price (significantly lower than period 1 pricing) in period 2 to maximize its. Among the two factors which affecting the production cost discussed in this paper, the technological advancement effect has a more significant impact on the firm profit.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
