Dynamic Pricing under Cost Reduction in the Presence of Myopic and Strategic Consumers

摘要

After release, a product usually suffers cost reductions during its whole lifespan. Compared to themyopic, strategic consumersmay have stronger incentive to delay the purchase once they perceive that a significant cost reduction will result in a markdown. The strategic (compared to themyopic) properties influence the seller both quantitatively in terms of proportion of strategic consumers and qualitatively in terms of customer patience. To forecast the reaction of the whole market under cost reduction, it is necessary to acquire the strategic properties. In this paper, we study the impacts of proportion of strategic consumers, customer patience, and cost reduction on dynamic pricing strategy when cost reduction comes from technology advancement.The seller makes pricing strategieswhen facing unknown future cost, and the buyermakes purchase decisions when facing unknown future price. Our study shows that generally both higher strategic consumer proportion and customer patience contribute to a delay in sales. Further, profit diversion happens under great combination of strategic properties. In addition, with the increase of customer patience, not only strategic but alsomyopic consumers will buy less. Finally, the strategic propertiesmoderate the pricing strategy in latter stage when there is a cost reduction. This indicates a threshold as combination of strategic properties, upon which seller tends to offer a smaller markdown to discourage strategic waiting, and under which seller tends to offer a greater markdown to divert strategic consumers to the latter period.