Lean Inventory, Ideal Pricing with Strategic Shoppers

In Forbes, an article Outsmarting Smart Shoppers, analyzes a Knowledge@Wharton article: "Purchasing, Pricing and Quick Response in the Presence of Strategic Consumers", by Wharton Prof Gérard P. Cachon.

" ... there are the strategic consumers, who are willing to buy full price sometimes, but at other times they will wait for a bargain. According to new Wharton research, it's these customers that retailers need to focus on in order to reap the full benefits of lean retail inventory management and variable pricing ... The research shows that when strategic consumers are factored into a theoretical model, lean inventory--or so-called "quick response"--systems are, on average, 67% more profitable."Although it is well established in the literature that quick response provides value by allowing better matching of supply with demand, it provides more value, often substantially more value, by allowing a retailer to control the negative consequences of strategic behavior. Furthermore, this latter benefit can be substantial ... ".

Detailed abstract and full technical paper here.