Journal article
Quick response under strategic consumers with high-price and stockout regrets
Computers & operations research, v 166, 106590
Jun 2024
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
•Stockout/high-price regret has a positive/negative effect on a firm optimal pricing and profit.•As stockout/high-price regret de/increases, firm optimal policy may transition from quick-response to traditional policy.•Regret has a positive value when stockout regret is significant and a negative value otherwise, and quick response has a positive value.•When stockout/high-price regret is significant, the value of regret in quick-response system is higher than traditional system regret value when quick-response cost is high/low.
This paper studies optimal pricing and inventory decisions of a perishable goods vendor in a traditional replenishment and quick-response system context—with the vendor offering strategic consumers who may exhibit regret behavior. Sometimes consumers may purchase goods without discounts (full-price) later experiencing high-price regret. Alternatively, consumers may face stockout regret when during goods price discount periods they face stockout. This study asks the question of whether and how firm price setting and inventory policy are affected by this dichotomy of regret and the quick-response cost with this regret behavior. The paper then identifies and compares the values of regret in the two systems and the values of quick response with and without regret. Findings show that stockout regret positively affects firm optimal pricing and profit in both systems. High-price regret has opposite effects. Additionally, regret in both systems have a positive value when stockout regret is significant and a negative value otherwise. When considering situations with and without regret, quick-response policy is consistently better than traditional replenishment policy. In a high quick-response cost situation, as the level of stockout (or high-price) regret increases (or decreases), the optimal firm policy transitions from traditional replenishment to quick-response policy. Finally, when stockout regret (or high-price regret) is significant, the value of regret in the quick-response system is higher than traditional replenishment system value of regret when quick-response cost is high (or low).
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Details
- Title
- Quick response under strategic consumers with high-price and stockout regrets
- Creators
- Hua Wang - Nanjing University of Posts and TelecommunicationsChunguang Bai - University of Electronic Science and Technology of ChinaBenjamin Lev - Drexel UniversityWei Chen - Chengdu University of Technology
- Publication Details
- Computers & operations research, v 166, 106590
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Decision Sciences (and Management Information Systems)
- Web of Science ID
- WOS:001206629900001
- Scopus ID
- 2-s2.0-85187235484
- Other Identifier
- 991021863172904721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Computer Science, Interdisciplinary Applications
- Engineering, Industrial
- Operations Research & Management Science