Dynamic pricing of limited inventories for multi-generation products
Journal
European Journal of Operational Research
Journal Volume
217
Journal Issue
2
Pages
394-403
Date Issued
2012
Author(s)
Abstract
In this research, we consider a retailer selling products from two different generations, both with limited inventory over a predetermined selling horizon. Due to the spatial constraints or the popularity of a given product, the retailer may only display goods from one specific generation. If the transaction of the displayed item cannot be completed, the retailer may provide an alternative from another generation. We analyze two models - posted-pricing-first model and negotiation-first model. The former considers negotiation as being allowed on the price of the second product only and in the latter, only the price of the first product is negotiable. Our results show that the retailer can adopt both models effectively depending on the relative inventory levels of the products. In addition, the retailer is better off compared to the take-it-or-leave-it pricing when the inventory level of the negotiable product is high. © 2011 Elsevier B.V. All rights reserved.
Subjects
Bargaining | Dynamic programming | Multi-generation products | Revenue management
Publisher
ELSEVIER SCIENCE BV
Type
journal article