| dc.description.abstract | In this study, we discuss a monopolistic retailer’s pricing and advertising strategies when facing strategic customers. In general, the customers will make a purchase when their utilities are equal or more than the price of product. However, the strategic customers may have the different decisions in the same situation, because they consider the possibility of markdown in the future. The strategic customers will evaluate whether making a purchase right now or waiting for sales when making the decision. Therefore, strategic customers may wait for sales even their utilities are more than the full price when they discover that the waiting is more benefic.
We assume a monopolistic retailer sells one product in two periods, and he will keep or reduce the price of product in the second period. The customer’s utility is a probability distribution, and they will make the decision by considering their own utility, the price of product, and the probability of product availability in the second period. We discuss the customer’s behavior and the retailer’s strategies in four cases. In case 1, the customers have no idea about the price of second period and the quantity of product. In case 2, the customers can expect the quantity of product by knowing the utility function. In case 3, the retailer announces the price of second period and the quantity of product. In case 4, the retailer only announces the quantity of product.
Furthermore, we assume the customer’s utility will be affected by advertisement, and further discuss the foregoing cases with the effect of advertisement.
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