Pricing Strategies of a Retailer Facing Heterogeneous Consumers under Supply Shortage
Numerous retailers prefer to sell multiple product variants to cate for consumers of different tastes.It contributes to obtaining competitive advantage and expanding market shares.These product variants mainly dif-fer in attributes such as color and size.However,supply shortage of a certain product is a common problem for a retailer selling multiple product variants.To this end,many downstream retailers adopt some pricing strate-gies to mitigate this supply risk.There are two pricing modes:uniform pricing and differentiated pricing.Under the differentiated pricing strategy,products are set with unequal prices.Under the uniform pricing strategy,the retailer designs the identical price.To understand two pricing strategies,two methods are combined:mathematical optimization and multi-agent modelling.First,a mathematical optimization model is developed including one retailer and many consumers.The retailer sells two product variants in market.Specially,these consumers are heterogeneous,who select one of products to buy.Pricing decisions and two pricing strategies are compared by the theoretical model.Second,a more complex model is extended based on the multi-agent modelling.Considering product valuation gap,ordering decision and bounded rationality,pricing strategies are further studied in a dynamic environment.There are two shortage cases considering product valuation gap:the product with a large valuation is short and the product with a small valuation is short.The impacts of valuation gap and supply risk on pricing strategies are investigated.The results show that(1)When products compete with each other,the differentiated pricing strategy is a better choice.(2)If each product monopolizes own market,the uniform pricing should be selected.(3)Product valuation gap has an impact on a retailer's pricing strategy.Especially,when the product with a lower valuation is not sufficient,the uniform pricing should be used.(4)A retailer's ordering decision depends on the market environment under demand uncertainty.These managerial insights can be used for firms to select pricing strategies to mitigate the supply uncertainty risk in reality.
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