Dynamic pricing under temperature control for perishable foods

Abstract

Consumers pay more and more attention to the quality of perishable foods, which is mainly affected by storage temperature. This paper presents a dynamic pricing model for perishable foods under temperature control. To maximize the total profit, the optimal price and storage temperature are obtained using Pontryagin’s maximum principle. A static pricing model is provided to compare with the dynamic one. It is shown by a numerical example that the dynamic policy can make more revenue than the static one. Moreover, the managerial implications are analyzed and the effectiveness of the proposed method is demonstrated.

Keywords

Temperature control / dynamic pricing / maximum principle / perishable foods

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