Skip to main content

Simulation study of the price differentiation effect in a stochastic deteriorating inventory with heterogeneous consumers – freshness sensitivity

Buy Article:

$53.17 plus tax (Refund Policy)

Abstract:

A fixed price policy regardless of expiration date may result in unsold inventory and sales loss. Price reduction over time as the expiration date approaches motivates customers to purchase all items, including the ones that are left with only a short interval until their expiration. We conduct a discrete event simulation that captures the main characteristics of this phenomenon. Results show that a moderate differentiation of price increases profits by 6%, a larger differentiation reduces profits. Profits are the highest for freshness-oriented customers. A fixed price policy is preferred in an environment of large variance and expected near term expirations.

Keywords: D4; L2; M3; freshness customers’ sensitivity; perishable inventory; price differentiation; random demand; random lifetime

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2011.570718

Affiliations: 1: Department of Management,Bar-Ilan University, Ramat-Gan, Israel 2: The College of Business Administration, Rishon LeZion, Israel

Publication date: August 1, 2012

More about this publication?
routledg/raef/2012/00000044/00000024/art00003
dcterms_title,dcterms_description,pub_keyword
6
5
20
40
5

Access Key

Free Content
Free content
New Content
New content
Open Access Content
Open access content
Subscribed Content
Subscribed content
Free Trial Content
Free trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more