The MarkDownDet.lng Model

Mark down pricing, Two period, deterministic case

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A single seller wants to set prices for a single product in two periods.
This is a full knowledge case. The potential buyers know what the prices will be in each of the two periods. Each buyer will buy the product in the period which gives the greater consumer surplus, i.e. reservation price - purchase price. Typically, a buyer will be willing to pay more, perhaps substantially, in the first period. E.g., the buyer is willing to pay more for a ski parka at the beginning of ski season.
If you are an economist, you can also think of this as a Stackelberg game in which the seller is the leader who makes the first decisions: the prices, and then the buyers optimize for themselves, given the prices.
Parameters: Ri(c)= reservation price of customer group c for period i, NP(c)= number of people in customer group c, COST = vendor's cost per unit of the product. Decision variables: Pi = price set for period i, (Seller decision) Yi(c)= 1 if customer group c buys in period i.(Buyer decision)


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