The assistant professor of marketing offers an optimal strategy for retailers to use price adjustment policies to increase their revenue in a recent International Journal of Production Economics article.
Xin Liu, assistant professor of marketing in the Martha and Spencer Love School of Business, co-authored the paper, “A price adjustment policy for maximizing revenue and countering strategic consumer behavior,” which was published in the International Journal of Production Economics.
Liu and co-author Mountaz Khouja, University of North Carolina-Charlotte, demonstrated how the implementation of price adjustments for retail consumers does not negatively affect the revenue for a retailer. They examined the optimal duration and price of the price adjustment markdown to offer insight on when the effect on revenue is most positive.
The abstract reads: “Most retailers offer a price adjustment protection policy. With this policy, if the retailer discounts the product, then time-eligible consumers who paid the regular price can apply and get a refund of the price difference. We show that for perishable products and a given order quantity and demand realization, offering price adjustment protection will not decrease the revenue of the retailer. Also, when consumers behave strategically, offering price adjustment protection increases the revenue of the retailer. We also examine the optimal duration of the price adjustment protection together with the optimal price markdown time. Our analysis shows that for a given order quantity, offering a price adjustment protection will leave revenue unchanged for low realizations of demand, will increase revenue for high realizations of demand, and will decrease revenue in the mid-range of demand realization. Price adjustment protection has a larger positive effect on revenue when the proportion of strategic consumers is high and that effect is further increased when more of them exhibit optimistic behavior.”
The International Journal of Production Economics focuses on topics treating the interface between engineering and management. It has a CiteScore of 10.5 and an impact factor of 5.134.
Prior to joining Elon in 2017, Liu earned her doctorate in management science and engineering from the University of Science and Technology of China. Her research interests include operations management, supply chain management, and marketing interface.