Abstract: ation of strategic consumers.We first consider the basic zigzag competition model where the retailers can satisfy the entire market demand.We provide equilibrium optimality conditions for both consumer and seller,and prove monotonicity results for special cases.We further extend the model to the situations where the retailers cannot satisfy the entire market demand.We demonstrate the effect of strategic consumer behavior on the performance of pricing policies through numerical examples and show that strategic customer behavior exerts significant pressure on prices,resulting with a substantial decline in profit. We also find that when the retailers cannot satisfy the entire market demand,strategic customer behavior need not always be detrimental to the seller.

Key words: strategic customer behavior, dynamic pricing, revenue management, zigzag competition