The Optimal Pricing and Ordering Policy for the Perishable Items with Reference Price Effect

Abstract

Pricing and inventory management of perishable items are crucial to the retailers Unlike durable products the quality and quantities of perishable items deteriorate over time Owing to the decline of the freshness condition the demand may decrease which could decrease the profit as well Accordingly a proper pricing and ordering strategy is needed to have higher profit for the enterprises Generally the retailers may offer price discounts before the selling period ends so that the sales volume can be boosted and reduce the ending inventory In order to set a price that consumers are willing to pay for the retailers have to take individuals’ reference price into consideration Therefore in this study a single period with four stages pricing and inventory model is implemented to determine the optimal price markdown and inventory ordering policy to maximize the total profit In our model the demand is dependent on the price reference price and time since they are the major factors affecting the demand Also we use the three-parameter Weibull function as the deterioration rate function in our model Finally a numerical example is presented to demonstrate this model accompanied by sensitivity analysis Some managerial insights are obtained from the results which will assist the retailer in improving the profit

Date of Award	2019
Original language	English
Supervisor	Tai-Yue Wang (Supervisor)