ABSTRACT
Literature has demonstrated evidence of the existence of a multi-period planning horizon over which consumers decide on the mix of purchases in order to optimise their budget on food expenses. An implication of such planning process is the redistribution of purchases over different prices and the creation of price thresholds that motivate significant changes in purchase behaviour. Redistribution of demand by the consumer around threshold prices to optimise total budget allocation over food expenses has serious implications on retail profit maximisation in the long run. This chapter illustrates through a simulation procedure the impact of such long-term planning by the consumer on the profitability of a retail outlet. A normative pricing model is developed to help retailers make decisions on their optimal pricing policies in a monopolistic market condition.
