Dynamic pricing involves setting different prices at different times of the buying season. One of the complexities of dynamic pricing strategy is managing ‘strategic’ consumers who usually wait for end-of-season clearance sales. New research shows that many retailers are setting prices in a way that entice strategic consumers to early season purchasing; this strategy, however, is myopic because it limits potential revenues from end-of-season clearance sales. The researchers show that setting pricing levels in the early season that encourage late season-buying by strategic consumers results in the best overall retail sales and revenues for the season.
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