Simulation Study of Optimal Pricing on Daily Perishable Products with Reference Price Effect

A simulation study is executed with respect to an end-of-period discount for daily perishable products. In case that supplied products will not be sold out by end-of-period, the sales floor manager sometimes sells the products in a discount price in order to increase the revenue of the period. The reference price of consumers for the products is consequently declined and some consumers would not purchase the products at a regular sales price. It is important for the manager to take the reference price effect into account so as to improve long-term profit. This paper formulates the end-of-period discount problem within a framework of dynamic programming. Optimal pricings are derived in a simulation study to estimate the influence of inventory distribution on the optimal pricings.