||Pricing decision is the minority of all important decisions which can apparently influence a firm's profit-making within extremely short time. In an era of meagre profit, firms cannot stand any more injury caused of mistake at pricing. However, lots of managers still make pricing decision according to their experience or the action of other competitors without any mechanism of price-determining based on their firms' resource condition. |
The subject of this research is to probe the abiding price-reducing strategy for fashion appearing firms. Fashion apparel is a kind of commodities with seasonality and popularity, and is an example of all perishable goods. For all sorts of characteristic such as the need for long lead time before production, short time span for sale , and the low salvage value after season...etc., it makes firms reduce price to close out inventories by the end of seasons to evade value loss. When it comes to price-reducing, the fashion apparel is quite different from other commodities. It is a kind of commodity which has speciality of phased and monotonicity on price reduction. Therefore, it lacks two kinds of elasticity which are price-adjusting at any time and adjusting the price range at will. For the characteristic of close interdependence between product and time, and the normal demand on price-reducing, fashion apparel firms need some decision tools which are more fast, correct, and practical than any other ones.
With two main parameters which are 'the levels of unsold inventory' and ' the length of season remaining ' along with two parameters which are 'discount factor' and ' the salvage value after season ', this research constructs out an stochastic dynamic programming model to maximize the expect profit and offer an program for calculating the optimal price-reduced range and time. After the analysis of generality and sensitivity with this model, it is found that the characteristics of this model are in conformity with theoretical research and real phenomenon of market. Besides, it is suitable for various kinds of price elastic demand. Hence, this model can be proved to be able to extend to other similar industries with the same nature.
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