IoT-Enabled Quality-Triggered Markdown Pricing for Perishable Food: Equity and Waste Implications

TL;DR

This paper explores how IoT technology can help reduce food waste and improve access to affordable food by enabling real-time pricing adjustments for perishable items.

Contribution

The study introduces an analytical model showing how IoT-enabled quality monitoring can optimize markdown pricing for perishables.

Findings

Earlier markdowns under IoT improve sell-through and reduce waste.

Deeper markdowns are optimal when quality is continuously monitored.

Price-sensitive consumers benefit from a longer window to buy affordable, acceptable-quality food.

Abstract

Inequitable access to affordable, nutritious food is partly sustained because markdowns on perishable products are often delayed until quality deterioration becomes visible, through which affordability gains are limited and waste is increased. In this study, the extent to which Internet of Things (IoT) real-time quality monitoring enables quality-triggered markdowns that reduce waste while improving food equity is examined. An analytical pricing and markdown model for perishables with quality-sensitive demand is developed, and optimal decisions under IoT-enabled quality observability and under a baseline setting without IoT are compared. Convexity is established for the retailer’s problem, and closed-form solutions are derived for the optimal regular price, markdown timing, and markdown depth. Under continuous quality visibility, earlier markdown initiation within the selling horizon is shown to be optimal while product quality remains acceptable, and a deeper markdown than in the non-IoT setting is shown to be optimal. Through numerical experiments, increased sell-through before products become unsalable is demonstrated, waste reduction is quantified, and an expanded time window is shown in which price-sensitive consumers can purchase acceptable-quality food at a lower price. Overall, improved food equity is supported by proactive, quality-aligned pricing policies without retailer profitability being sacrificed.

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