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Dynamic pricing with ‘BOGO’ promotion in revenue management

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  • Kyoung-Kuk Kim
  • Chi-Guhn Lee
  • Sunggyun Park

Abstract

We consider a dynamic pricing problem when a seller, facing uncertain demands, sells a single product in a finite horizon. The seller actively adopts dynamic pricing and quantity discount schemes. The proposed model is based on the assumption that each customer has random reservation prices and the purchase size depends on the posted price and discount. We particularly focus on the widely adopted promotional schemes ‘buy one get one free’ and ‘50% off’ and study the optimal strategic choices of the seller. Analytical results together with numerical experiments are presented to help us obtain managerial insights. Additional numerical results for a generalised model are provided so as to examine the effectiveness of promotional schemes.

Suggested Citation

  • Kyoung-Kuk Kim & Chi-Guhn Lee & Sunggyun Park, 2016. "Dynamic pricing with ‘BOGO’ promotion in revenue management," International Journal of Production Research, Taylor & Francis Journals, vol. 54(17), pages 5283-5302, September.
    • Handle: RePEc:taf:tprsxx:v:54:y:2016:i:17:p:5283-5302
    DOI: 10.1080/00207543.2016.1173250
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    References listed on IDEAS

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    Cited by:

    1. Ling Zhao & Jun Liu & Minghua Xiong & Anquan Zou, 2022. "Dual-Channel Retailer’s Multi-Period Inventory and Pricing Policy with the Quantity-Sales Mode," Sustainability, MDPI, vol. 14(18), pages 1-18, September.
    2. Khouja, Moutaz & Li, Yuefeng & Zhou, Jing, 2023. "Nonlinear pricing for yield management and countering strategic consumer behavior," European Journal of Operational Research, Elsevier, vol. 307(1), pages 212-232.
    3. Shin, Youngchul & Lee, Sangyoon & Moon, Ilkyeong, 2021. "Robust multiperiod inventory model with a new type of buy one get one promotion: “My Own Refrigerator”," Omega, Elsevier, vol. 99(C).

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