Abstract: Motivated by the common practice that retailers usually divide fresh products,which may decay and/or deteriorate during the distribution process,into different quality levels and sell them in a separate way,this paper studies the optimal selling strategies for a retailer of fresh products.Specifically,we consider a scenario in which there are two quality levels of fresh products.Based on the customer's choice behavior between them,the optimal pricing decision for the low-level products is investigated.Moreover,a mixed selling strategy,where the high-level and low-level products are sold as an admixture,is compared with the separate selling strategy.Our research shows that,the revenue improvement of the separate selling strategy (over the mixed strategy) could be rather significant,especially when the demand rate is low and/or the product supply is sufficient.

Key words: fresh products, customer choice behavior, optimal pricing, multiple quality levels