Abstract: Based on relevant research and practices on fashion strategy consumption behavior, two kinds of consumer psychological motivations are summarized: one is the “high price regret” derived from missing the low price due to impulse buying; the other is the “stockout regret” derived from waiting for the low price but encountering out of stock. On this basis, the effects of two regret psychologies on the Markdown (MD) pricing strategy and the Markup (MU) pricing strategy are analyzed in a two-period sales. First, two regret psychologies are taken into account in consumer's utility function and then, with the stochastic demand with consumer behavior, how the firm sets the pricing decision and ration level is discussed by model analysis in two-period selling of Markdown (Markup) pricing strategy. By comparing the firm's profits between both pricing modes, the interactive influence of two regret psychologies on the sales stage segmentation is investigated in depth. Our results suggest that the propensity to delay buying will be weaken for consumers with regrets and the firm can induce customers to buy at high prices by creating appropriate rationing risks. Under the two pricing modes, if certain condition is satisfied, facing consumers with regret psychologies, the firm can realize a higher optimal profit than that under the unified pricing, and the Markup pricing strategy is more beneficial than the Markdown pricing strategy.

Key words: strategic consumer; regret psychology; dynamic pricing; rationed