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

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 expectatio...

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Bibliographic Details
Published in:Mathematical problems in engineering 2021, Vol.2021, p.1-21
Main Author: Li, Yuan
Format: Article
Language:English
Subjects:
Behavior
Competition
Competitive advantage
Consumers
Decision making
Decisions
Electronic commerce
Inventory
Inventory control
Inventory management
Optimization
Parameter sensitivity
Pricing
Product returns
Profits
Retail stores
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Summary: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.
ISSN:1024-123X
1563-5147
DOI:10.1155/2021/9650805