Multiperiod Dynamic Pricing and Inventory Control Decisions for an Omnichannel BOPS Retailer with Reference Price Effects

Abstract

This paper utilizes the consumers’ reference price in prospect theory to analyze an omnichannel retailer’s multiperiod pricing and inventory management problem in which consumers can cancel their orders before payment and return the products after payment if the products do not meet their expectation. The omnichannel retailer’s optimal equilibrium pricing and ending inventory level are derived under reference price effects by maximizing the discounted total profit over the infinite planning horizon, where the optimal decisions we discussed under two scenarios: loss neutrality and loss aversion. The analysis shows that the convergence of the pricing and ending inventory level toward their equilibrium is from above or below, depending on the relative location of the initial reference price with respect to the unique equilibrium price. Moreover, a set of sensitivity analyses is discussed to characterize the impacts of system parameters on the optimal decisions. This research fills the gap of behavioral operation in the field of omnichannel joint pricing and inventory management.

Bibliometrix Analysis: Management Inventory dan Supply Management

“…[15] This author has written 4 articles and has a fraction of 0.85, which shows that this author is relatively responsible for about 85% of each article written. [16] This author has written 4 articles and has a fraction of 1.38, which indicates that this author is relatively responsible for more than one article in each article written. This may be due to collaboration with other authors or other factors.…”

How Does the Reference Price Mechanism Affect Competition?

“…Crettez et al [40] discuss the existence of the optimal dynamic pricing strategy when the demand depends on the reference price, and the authors give the optimal pricing strategy under different initial values of the reference price. Using the reference price effect, Li [41] analyses the multiperiod pricing and inventory management issues of an omnichannel retailer and concludes that the convergence of pricing and ending inventory level to equilibrium depends on the relative position of the initial reference price relative to the unique equilibrium price. As the online sales environment matures, the reference price has an important impact on the price set by online retailers.…”