Coordinated inventory control and pricing policies for online retailers with perishable products in the presence of social learning. (June 2022)

• Record Type: Journal Article
• Authors: Vahdani, Mahmood; Sazvar, Zeinab
• Is Part Of: Computers & industrial engineering. Volume 168(2022)
• Publication Date: 2022-06
• Subjects: Dynamic pricing -- Inventory control -- Perishable product -- Social learning -- Online retailing -- Network externality; Engineering -- Data processing -- Periodicals; Industrial engineering -- Periodicals; 620.00285
• DOI: 10.1016/j.cie.2022.108093
• Languages: English
• ISSNs: 0360-8352

Abstract

Highlights: Social technologies create opportunities for firms to facilitate social learning. Customers are uncertain about the quality of perishable products exposed to EDBP. Retailers can counteract the negative effect of EDBP through social learning. Joint pricing and inventory control decisions are analyzed under social learning. Structural properties of the optimal solution are analyzed. Abstract: During the period of COVID-19, restrictive social distancing measures have stimulated retailers to increasingly turn to online selling platforms and apply social technologies in marketing even for food and grocery products. Social technologies create opportunities for online retailers to effectively facilitate word-of-mouth communication by allowing consumers to share their consumption experiences. It makes consumers' behavior more observable to potential customers and leads to social learning. Social learning has a notable impact on purchasing decisions of potential customers, influencing the demand for the product. In this regard, this paper aims to examine the coordinated dynamic pricing and inventory control problem for a perishable product under social learning. The idea is that online retailers who sell a perishable product under Expiration Date-Based Pricing (EDBP) policy counteract the negative quality inference of this practice through social learning. To formulate the problem, a mathematical model is developed and its structural properties are analyzed for a two-period lifetime product. Furthermore, numerical analysis is conducted in a real case study to derive some managerial insights. The obtained results show that the online retailer can promote the EDBP by adopting a consumer-generated online review system. As well, to better exploit the system, the online retailer should adjust the product pricing and inventory control policies with the evolution of consumers' ratings. Finally, the firm's profit and waste avoidance are improved by incorporating consumers' social learning behavior into the pricing and inventory policies.