Fresh agricultural products such as vegetables, fruits, aquatic products and meat products are damaged and spoiled heavily in supply chains in China. The retail market is a key stage of the loss for factors like unreasonable inventory and pricing decisions. In consideration of the perishability of fresh agricultural products, retailers adopt dynamic pricing strategy to decrease their losses and promote their profits. Strategic customers weigh the benefits of purchasing today against the benefits of waiting and purchasing in the future, which makes the pricing and inventory decision-making of the fresh agriculture product retailers faced much more challenges in the retail market.
In this paper, one monopolistic fresh agricultural product retailer faced with numerous strategic consumers is considered. The retailer maximizes its profit by adjusting products' prices and inventory level in two sale periods. Strategic consumers decide which period to purchase the fresh agricultural product according to the expectation changes in price and value. A two-period model is developed to study the Decision-making process. The fresh agricultural product's decreasing of freshness is discretized by introducing of value residual rate and a rational expected equilibrium method is used in the model. The single-period scenario is also analyzed.
Through the model analysis and numerical simulation, a rational expectation equilibrium solution of retailer's optimal pricing and inventory level is obtained. The influence mechanism of fresh agricultural product's value residual rate on the retailer's optimal pricing, optimal inventory level and profit is also discussed. Results show that the retailer's optimal price and the inventory level both increase with the increment of the value residual rate in the single-period model. Moreover, there is a threshold in the variation trend of the retailer's optimal second-period price with the value residual rate in the two-period model.
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