Dynamic Pricing and Markdown Timing Policies for Fashion Goods with Strategic Behaviour of Consumers

In this article, we discuss the optimal pricing strategy and best markdown timing in two sale periods for a monopoly seller, when faced with strategic consumers. Based on the Stackelberg game theory, a mathematical model is constructed to maximize the seller’s revenue when the markdown timing is certain or uncertain. Consumers are heterogeneous with different valuations for the same product. Moreover, after retailer decision-making, consumers would determine their purchase policies about the time and price, by comparing the prices and individual valuations in the two sale periods. Finally, a numerical example is considered to illustrate the optimal pricing strategy and best purchase policy.