Proceedings of the 8th International Conference on Research in Management and Economics
Year: 2023
DOI:
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price-commitment to strategic consumers under uncertain demand: the effects of commitment and segmentation
Xiang Gao, Hao Li
ABSTRACT:
This paper introduces a two-period, pricing policy under duopoly competition between two firms offering an identical product to consumers who are inter-temporal utility maximizers. The firms adjust prices to maximize profits and find out optimal pricing policy from dynamic pricing, fixed-ratio pricing and elastic pricing policies. The consumer decides to purchase the product at current price from a firm, remain in the market to purchase product from the other firm in the next period or exit the market. We show that the effect of the number of people in the market on firms’ profits is discussed through numerical examples. We also find that the elastic pricing is consistent with dynamic pricing. And we further find that, in spite of dynamic pricing is a more complex policy than fixed-ratio pricing, it may lead to decreased equilibrium profits.
keywords: duopoly competition, strategic consumer behavior, pricing policy