Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers
After release, a product usually suffers cost reductions during its whole lifespan. Compared to the myopic, strategic consumers may have stronger incentive to delay the purchase once they perceive that a significant cost reduction will result in a markdown. The strategic (compared to the myopic) pro...
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| Format: | Article |
| Language: | English |
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Wiley
2019-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2019/3272875 |
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| author | Guangning Liu Zhenzhong Guan Hua Wang |
| author_facet | Guangning Liu Zhenzhong Guan Hua Wang |
| author_sort | Guangning Liu |
| collection | DOAJ |
| description | After release, a product usually suffers cost reductions during its whole lifespan. Compared to the myopic, strategic consumers may have stronger incentive to delay the purchase once they perceive that a significant cost reduction will result in a markdown. The strategic (compared to the myopic) properties influence the seller both quantitatively in terms of proportion of strategic consumers and qualitatively in terms of customer patience. To forecast the reaction of the whole market under cost reduction, it is necessary to acquire the strategic properties. In this paper, we study the impacts of proportion of strategic consumers, customer patience, and cost reduction on dynamic pricing strategy when cost reduction comes from technology advancement. The seller makes pricing strategies when facing unknown future cost, and the buyer makes purchase decisions when facing unknown future price. Our study shows that generally both higher strategic consumer proportion and customer patience contribute to a delay in sales. Further, profit diversion happens under great combination of strategic properties. In addition, with the increase of customer patience, not only strategic but also myopic consumers will buy less. Finally, the strategic properties moderate the pricing strategy in latter stage when there is a cost reduction. This indicates a threshold as combination of strategic properties, upon which seller tends to offer a smaller markdown to discourage strategic waiting, and under which seller tends to offer a greater markdown to divert strategic consumers to the latter period. |
| format | Article |
| id | doaj-art-1975c6d03187498abf11f52a702cdc9f |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2019-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-1975c6d03187498abf11f52a702cdc9f2025-02-03T06:11:22ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2019-01-01201910.1155/2019/32728753272875Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic ConsumersGuangning Liu0Zhenzhong Guan1Hua Wang2School of Economics and Management, Southwest Jiaotong University, 111 North 2nd Ring Road, Chengdu 611756, ChinaSchool of Economics and Management, Southwest Jiaotong University, 111 North 2nd Ring Road, Chengdu 611756, ChinaSchool of Economics and Management, Southwest Jiaotong University, 111 North 2nd Ring Road, Chengdu 611756, ChinaAfter release, a product usually suffers cost reductions during its whole lifespan. Compared to the myopic, strategic consumers may have stronger incentive to delay the purchase once they perceive that a significant cost reduction will result in a markdown. The strategic (compared to the myopic) properties influence the seller both quantitatively in terms of proportion of strategic consumers and qualitatively in terms of customer patience. To forecast the reaction of the whole market under cost reduction, it is necessary to acquire the strategic properties. In this paper, we study the impacts of proportion of strategic consumers, customer patience, and cost reduction on dynamic pricing strategy when cost reduction comes from technology advancement. The seller makes pricing strategies when facing unknown future cost, and the buyer makes purchase decisions when facing unknown future price. Our study shows that generally both higher strategic consumer proportion and customer patience contribute to a delay in sales. Further, profit diversion happens under great combination of strategic properties. In addition, with the increase of customer patience, not only strategic but also myopic consumers will buy less. Finally, the strategic properties moderate the pricing strategy in latter stage when there is a cost reduction. This indicates a threshold as combination of strategic properties, upon which seller tends to offer a smaller markdown to discourage strategic waiting, and under which seller tends to offer a greater markdown to divert strategic consumers to the latter period.http://dx.doi.org/10.1155/2019/3272875 |
| spellingShingle | Guangning Liu Zhenzhong Guan Hua Wang Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers Discrete Dynamics in Nature and Society |
| title | Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers |
| title_full | Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers |
| title_fullStr | Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers |
| title_full_unstemmed | Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers |
| title_short | Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers |
| title_sort | dynamic pricing under cost reduction in the presence of myopic and strategic consumers |
| url | http://dx.doi.org/10.1155/2019/3272875 |
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