Dynamic Pricing with Strategic and Myopic Consumers

This paper develops a model of two-period pricing problem when the customer pool consists of strategic types and myopic types and customer valuations are stochastic. We divide the customers into some groups and use the bottom valuation of a certain group to describe its responsive behavior to the seller´s pricing strategy. By solving a two-stage dynamic programming problem, we provide the optimal price policy for the seller. The numerical example shows that with increase of the proportion of strategic customers, the markdown extent reduces, the total expected number of customers who purchase becomes smaller, and the total expected profit drops. We also discuss two special cases, in which the customers are exclusively myopic or they are exclusively strategic.