Article: Price decision analysis for perishable products under threat of entry: the case of vertical product differentiation Journal: International Journal of Manufacturing Technology and Management (IJMTM) 2023 Vol.37 No.5/6 pp.599 - 618 Abstract: Perishable goods companies respond to competitive pressures through differentiated strategies, but pricing issues have become more complicated. This study analyses the optimal pricing of two companies offering vertically differentiated products to strategic customers who are intertemporal utility maximisers. It is assumed that incumbent companies respond to the entry threat of late-stage enterprises through pricing strategies. A two-period dynamic price game model is constructed under the price commitment and dynamic pricing strategies, and this problem is modelled based on the company's objective to maximise total expected profits and the optimal timing of the latecomer's entry. It is demonstrated through numerical examples that the timing of a latecomer entering the market under commitment pricing is delayed with the increase in a customers' strategic behaviour. It is also shown that an incumbent company adopting commitment pricing may have much higher profits than one that uses dynamic pricing. Interestingly, a lower customer pleasure level makes the incumbent company's revenue decline. Inderscience Publishers - linking academia, business and industry through research

Title: Price decision analysis for perishable products under threat of entry: the case of vertical product differentiation

Authors: Hao Li; Yang Qian; Hao-Nan Xu; Xiang Gao

Addresses: School of Economics and Management, Chongqing Jiaotong University, Chongqing 400074, China; Western China Transport-Economy-Society Development Studies Centre, Chongqing 400074, China ' School of Economics and Management, Chongqing Jiaotong University, Chongqing 400074, China ' School of Economics and Management, Chongqing Jiaotong University, Chongqing 400074, China ' School of Economics and Management, Chongqing Jiaotong University, Chongqing 400074, China

Abstract: Perishable goods companies respond to competitive pressures through differentiated strategies, but pricing issues have become more complicated. This study analyses the optimal pricing of two companies offering vertically differentiated products to strategic customers who are intertemporal utility maximisers. It is assumed that incumbent companies respond to the entry threat of late-stage enterprises through pricing strategies. A two-period dynamic price game model is constructed under the price commitment and dynamic pricing strategies, and this problem is modelled based on the company's objective to maximise total expected profits and the optimal timing of the latecomer's entry. It is demonstrated through numerical examples that the timing of a latecomer entering the market under commitment pricing is delayed with the increase in a customers' strategic behaviour. It is also shown that an incumbent company adopting commitment pricing may have much higher profits than one that uses dynamic pricing. Interestingly, a lower customer pleasure level makes the incumbent company's revenue decline.

Keywords: vertical product differentiation; price commitment; dynamic pricing; strategic consumer behaviour.

DOI: 10.1504/IJMTM.2023.133683

International Journal of Manufacturing Technology and Management, 2023 Vol.37 No.5/6, pp.599 - 618

Accepted: 21 Jun 2022
Published online: 29 Sep 2023 *

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Title: Price decision analysis for perishable products under threat of entry: the case of vertical product differentiation

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