Study on the Perishable Product’s Pricing Decision With Overconfident Consumers in the Dual-Channel Setting

Abstract

With the development of internet, the online shopping mode has become more popular among consumers, and the online direct selling becomes more common. Besides buying products from traditional stores, consumers could get the product directly from the manufacturer online. In the dual channel setting, the competition becomes fiercer. Retailer should focus more on the price decision and take suitable pricing strategy to increase its profit. In this paper, consumer’s overconfidence behavior is incorporated into perishable products’ pricing decision in the partially integrated dual channel setting. Through the analysis of consumer’s decision making process, this paper constructs the model for partially integrated manufacturer and retailer under the mean and precision overconfidence scenarios, conducts the optimal analysis, and analyzes the effect of consumer’s overconfidence level on the optimal wholesale, retail and direct selling prices. We conclude that, no matter consumers are mean-overconfident or precision-overconfident; there are optimal wholesale price, direct sale price and retail price. Business enterprises should enhance their information collection capability and adopt some marketing measures to influence consumer’s overconfidence level in order to increase the sales revenue.