Bundle Pricing Decisions for Fresh Products with Quality Deterioration

Abstract

How to sell fresh products quickly to decrease the storage cost and to meet customer quality requirement is of vital importance in the food supply chain. Bundling fresh products is an efficient strategy to promote sales and reduce storage pressure of retailers. In this paper, we consider the bundle pricing decisions for homogeneous fresh products with quality deterioration. The value of fresh products with quality deterioration is approximated as an exponential function based on which customer's reservation prices are calculated. A nonlinear mixed integer programming model is used to formulate the bundle pricing problem for fresh products. By adding auxiliary decision variables, this model is converted into a mixed integer linear program. Numerical experiments and sensitive analysis are conducted to provide managerial insights for bundling fresh products with quality deterioration.