Document Type : Research Article-en
Authors
1
Agricultural Economics Department, Faculty of Agricultural Engineering, Sari Agricultural Sciences and Natural Resources University, Sari, Iran
2
Department of Agri-Food Sciences and Technologies, Alma Mater Studiorum, Università di Bologna, Bologna, Italy
Abstract
Agricultural products, are mostly perishable, and ensuring their quality through methods like cold storage or optimal conditions can present significant economic challenges for retailers and small-scale producers. In some cases, these products lose their quality and marketability within a span of less than 24 hours. The main challenge in adopting this strategy is determining the timing and amount of the price discount. To optimize price discounting, four functions need to be estimated: a) a time-dependent quality function, b) a price change function, c) a demand function that is a function of price and quality, and d) an objective function, which is considered here as the retailer's profit function. We employ dynamic pricing models that integrate factors such as quality degradation, inventory levels, and consumer behavior. The research data was collected from three fruit and vegetable stores in Gorgan city. The time period was three months, comprising all working days. Each seller was asked to report the price and quantity of sales on an hourly basis from the beginning to the end of the working day. In this way, about 1000 data were recorded from each store. Tomato was selected as case study due to their widespread consumption, continuous supply, and rapid perishability. The results show that price discounts can significantly enhance profitability while reducing the risk of unsold and wasted products. Specifically, the findings indicate that implementing price discounts every 3 to 4 hours yielded the highest profitability. The average discount is 35%, leading to an 82% increase in gross profit. In contrast, shorter discount intervals (every 1 to 2 hours) with an average discount of 18% improved gross profit by 73%. On the other hand, longer discount intervals (every five to seven hours) with an average discount of 46% resulted in a 66% increase in gross profit. Furthermore, this study further emphasizes how crucial consumer perception is to the effectiveness of dynamic pricing methods. The perception of lower product quality brought on by excessive discounting may have a detrimental effect on long-term store credit and customer trust. Perishable product waste can be reduced through the implementation of price reduction strategies. However, the results indicate that sellers’ profits increase in the absence of price reductions. Future research could enhance this framework by incorporating additional factors that influence product quality, such as temperature, humidity, and product variety; examining the effects of consumer price expectations on demand; extending the model to other perishable products, including meat and dairy; and leveraging advanced technologies, such as blockchain and artificial intelligence, to improve dynamic pricing and inventory management.
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