Abstract
Confronted with well-informed consumers, the firms have to take everything into consideration. Through the classic game theory, pricing mechanism is discussed with different characteristics of consumer behavior. The consumer population is heterogeneous along two dimensions: they may have an inclination towards the obedience of the public and different degrees of patience. After introducing the price deviation variables, we demonstrate that heterogeneity in both inclination and patience is important because they jointly determine the structure of optimal pricing policies. The numerical example shows that the markdown degree, the expected purchasing amount of consumers and the expected profits of the firm are increasing with the increase of the proportion of counter-conformity consumers. And we also examine whether the discount rate of capital, counter-conformity consumers and myopic consumers will have an impact on the sales. In particular, when the discount rate and the proportion of the conformity customers are too high, the expected profits of the firm are increasing mildly with the increase of the proportion of myopic customers. Therefore, the discount rate and characteristics of consumer behavior should be considered together to maximize the revenue of firms.
Recommended Citation
CHEN, Xiao-hong and CHEN, Sha, "Dynamic pricing with the counter-conformity, conformity and non-conformity of consumer behavior" (2013). WHICEB 2013 Proceedings. 57.
https://aisel.aisnet.org/whiceb2013/57