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arXiv · 1801.02263

Seasonal Goods and Spoiled Milk: Pricing for a Limited Shelf-Life

Atiyeh Ashari Ghomi·Allan Borodin·Omer Lev
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Abstract

We examine the case of items with a limited shelf-life where storing an item (before consumption) may carry a cost to a buyer (or distributor). For example, eggs, milk, or Groupon coupons have a fixed expiry date, and seasonal goods can suffer a decrease in value. We show how this setting contrasts with recent results by Berbeglia et al (arXiv:1509.07330(v5)) for items with infinite shelf-life. We prove tight bounds on the seller's profits showing how they relate to the items' shelf-life. We show, counterintuitively, that in our limited shelf-life setting, increasing storage costs can sometimes lead to less profit for the seller which cannot happen when items have unlimited shelf-life. We also provide an algorithm that calculates optimal prices. Finally, we examine empirically the relationship between profits and buyer utility as the storage cost and shelf-life duration change, and observe properties, some of which are unique to the limited shelf-life setting.

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Atiyeh Ashari Ghomi, Allan Borodin, Omer Lev. 2018-01-07. Seasonal Goods and Spoiled Milk: Pricing for a Limited Shelf-Life. https://arxiv.org/abs/1801.02263

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