[Dynamic Pricing Perishable Products]

by

The University of Southampton

Acknowledgement

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

Declaration

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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Abstract

Consumers are less likely to purchase perishable goods when their expiry dates are near. For this reason, retailers frequently implement a discount pricing policy when the products have reached closer to their expiry dates. This paper introduces a simple methodology for helping the managers in their discount pricing decisions. Based on the expected value approach, the suggested method utilizes the probability values obtained from the past experiences and calculates an expected profit value for each alternative discount policy. Decision maker then selects the discount policy with the highest expected profit.

Key words: Perishable products, Temporary pricing, Dynamic pricing

Table of Contents

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Background1

Problem Statement2

Research objectives3

Rationale of the study3

Significance of the study4

CHAPTER 2: LITERATURE REVIEW6

Chapter 3: Methodology12

Modelling12

Model construct13

Inventory17

Time18

CHAPTER 4: FINDINGS AND ANALYSIS20

CHAPTER 5: DISCUSSION & CONCLUSION29

REFERENCES32

Chapter 1: Introduction

There are hundreds of papers forced on optimizing the pre-set price of perishable product and lot-size quantity. Young H. Chun(1999) conduct a mathematic model which assumes the optimal price is based on demand rate, buyer's preference, and length of the sales period. Ferguson and Koenigsberg (2005) highlight the methods of the systematic logic of manage deteriorating inventory. It is a two period strategy; first period is about determining characteristic of the market. After had obtained knowledge of the market potential from the first period, the optimal lot-size and pricing can be made based on the data gathered from the first period.

If the actual demand is higher than the estimated demand, at the end of the term there would be a out of stock shortage. For the daily grocery such as milk and bread, it cannot afford the damage of the brand image.

Background

As the development of social media and e-commerce, the information exchange is getting faster and global businesses tight together. Information technology is playing an enormous role and it is still increasing. E-commerce has gradually merged to our life. Information highly exchanging accompanies with there are dozens of Email received by mail box every day; lots of them are started with promotion and price discount. Promotion discount and 'last minutes' shopping attract lots of attentions. On the other hand, entity businesses such as grocery supermarket facing problem about deal with optimizing decision making. Fluctuate of demand lead to various results at the end of the particular term, shortage, just sold or leftover. Huge amount of types of product make the discount system truly complex. Most of those problems are start with one origin which is the products would lose its value in a known period; however, the time for most of ...