A two-period pricing model for perishable items

Abstract

This paper presents a two-period pricing model for perishable items via an advance selling strategy deployed within electronic businesses. This model is proposed by classifying consumers based on their shopping habits: strategic consumers and conventional consumers. The model was developed both with and without a consumer order cancellation variable. Numerical computation and sensitivity analysis were conducted to test and justify the theoretical model. The results demonstrate that the ratio of potential consumers in an advance selling period to that in regular selling period is the main factor affecting pricing decisions. Consumers' perception of price fairness and order cancellation have effect on sellers' total revenue. The best revenue and price is obtained by adjusting the length of the advance selling period.