Download or read book Dynamic Pricing in the Presence of Strategic Consumers written by Mirko Kremer and published by . This book was released on 2015 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the impact of strategic consumer behavior on retailers' dynamic pricing decisions. We present a stylized two-period model, and test the equilibrium predictions in a set of behavioral experiments in which human subjects played the role of pricing managers. Our main insight is that relative to equilibrium predictions, subjects underprice in the main selling season. Consequently, they sell more inventory and obtain higher revenue in that season. However, by doing so they significantly limit their ability to generate revenue in the markdown season, which, in the presence of strategic consumers is a major source of revenue.

Download or read book Dynamic Pricing in the Presence of Strategic Consumer with Product and Intertemporal Substitution written by EunMi Lee and published by . This book was released on 2011 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study develops a dynamic pricing model with a quality substitutable product, taking into account strategic and myopic consumers. In each of the two periods, the firm can choose between offering a high quality product, a low quality product or both and the corresponding price for the product. Strategic consumers compare current utility with future utility in order to decide the time of purchase and the quality of the product in an attempt to maximize their utilities. Myopic consumers consider only current utility in purchasing of the products. We generate scenarios, prove whether a scenario is feasible and which scenario produces the best profit for the firm. Our result suggests that the firm obtains the best profit when it provides only high quality products in each of the two periods. In other words, the firm does not have to offer quality substitution as intertemporal substitution suffices to maximize the expected profit.

Download or read book Dynamic Pricing Under Demand Uncertainty in the Presence of Strategic Consumers written by Yinhan Meng and published by . This book was released on 2011 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effect of strategic consumer behavior on pricing, inventory decisions, and inventory release policies of a monopoly retailer selling a single product over two periods facing uncertain demand. We consider the following three-stage two-period dynamic pricing game. In the first stage the retailer sets his inventory level and inventory release policy; in the second stage the retailer faces uncertain demand that consists of both myopic and strategic consumers. The former type of consumers purchase the good if their valuations exceed the posted price, while the latter type of consumers consider future realizations of prices, and hence their future surplus, before deciding when to purchase the good; in the third stage, the retailer releases its remaining inventory according to the release policy chosen in the first stage. Game theory is employed to model strategic decisions in this setting. Each of the strategies available to the players in this setting (the consumers and the retailer) are solved backward to yield the subgame perfect Nash equilibrium, which allows us to derive the equilibrium pricing policies. This work provides three primary contributions to the fields of dynamic pricing and revenue management. First, if, in the third stage, inventory is released to clear the market, then the presence of strategic consumers may be beneficial for the retailer. Second, we find the optimal inventory release strategy when retailers have capacity limitation. Lastly, we numerically demonstrate the retailer's optimal decisions of both inventory level and the inventory release strategy. We find that market clearance mechanism and intermediate supply strategy may emerge as the retailers optimal choice.

Download or read book Strategic Waiting for Consumer Generated Quality Information written by Man Yu and published by . This book was released on 2013 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study the impact of consumer-generated quality information (e.g., consumer reviews) on a firm's dynamic pricing strategy in presence of strategic consumers. Such information is useful, not only to the consumers that have not yet purchased the product, but also to the firm. The informativeness of the consumer-generated quality information depends, however, on the volume of consumers who share their opinions and, thus, depends on the initial sales volume. Hence, via its initial price, the firm not only influences its revenue but also controls the quality information flow over time. The firm may either enhance or dampen the quality information flow via increasing or decreasing initial sales. The corresponding pricing strategy to steer the quality information flow is not always intuitive. Compared to the case without consumer-generated quality information, the firm may reduce the initial sales and lower the initial price. Interestingly, the firm may get strictly worse off due to the consumer-generated quality information. Even when the firm benefits from consumer-generated quality information, it may prefer less accurate information. Finally, consumer surplus can also decrease due to the consumer-generated quality information, contrary to the conventional wisdom that word-of-mouth should help consumers.

Download or read book Consumer Driven Demand and Operations Management Models written by Serguei Netessine and published by Springer Science & Business Media. This book was released on 2009-06-02 with total page 488 pages. Available in PDF, EPUB and Kindle. Book excerpt: This important book is by top scholars in supply chain management, revenue management, and e-commerce, all of which are grounded in information technologies and consumer demand research. The book looks at new selling techniques designed to reach the consumer.

Download or read book Dynamic Pricing in the Presence of Social Externalities and Reference price Effect written by Jafar Chaab and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Pricing of Conditional Upgrades in the Presence of Strategic Consumers written by Yao Cui and published by . This book was released on 2016 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study a conditional upgrade strategy that has recently emerged in the travel industry. After a consumer makes a reservation for a product (e.g., a hotel room), she is asked whether she would like to upgrade her product to a higher-quality (more expensive) one at a discounted price. The upgrade, however, is not fulfilled immediately. The firm fulfills upgrades at check-in if higher-quality products are still available, and the upgrade fee is charged to the consumer if and only if she actually gets upgraded. Consumers decide which product type to book and whether to accept an upgrade offer or not based on the anticipated upgrade probability.We find that conditional upgrades create value by improving demand-supply matching for the firm. The firm can use the conditional upgrade channel to flexibly manage capacity allocations and re-optimize demand segmentation. For a firm that takes product prices as given, offering conditional upgrades is effective in compensating for the firm's lack of ability in setting prices optimally. For a firm that has the ability to optimize product prices, conditional upgrades generate higher revenues than dynamic pricing.

Download or read book Dynamic Pricing with Heterogeneous Patience Levels written by Ilan Lobel and published by . This book was released on 2017 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the problem of dynamic pricing in the presence of patient consumers. We call a consumer patient if she is willing to wait a certain number of periods for a lower price and will purchase as soon as the price is equal to or below her valuation. We allow for arbitrary joint distributions of patience levels and valuations. We propose an efficient dynamic programming algorithm for finding optimal pricing policies. The dynamic program requires a larger state space than its counterpart for a strategic consumers model. We find numerically that optimal policies can take the form of incomplete cyclic policies, combining features of both nested sales policies and decreasing cyclic policies.

Download or read book Behavioral Consequences of Dynamic Pricing written by David Prakash and published by BoD – Books on Demand. This book was released on 2022-08-19 with total page 155 pages. Available in PDF, EPUB and Kindle. Book excerpt: Digital technologies are driving the application of dynamic pricing. Today, this pricing strategy is used not only for perishable products such as flights or hotel rooms, but for almost any product or service category. With dynamic pricing, retailers frequently adjust their prices over time to respond to factors such as demand, their supply and that of competitors, or the time of sale. Additionally, dynamic pricing allows retailers to take advantage of a large share of consumers' willingness to pay while avoiding losses from unsold products. Ultimately, this can lead to an increase in revenue and profit. However, the application of dynamic pricing comes with great challenges. In addition to the technological implementation, companies have to take into account that dynamic pricing can cause complex and unintended behavioral consequences on the consumer side. The key objective of this dissertation is to provide a deeper understanding of the impact of dynamic pricing on consumer behavior. To this end, this dissertation presents insights from four perspectives. First, how reference prices as a critical component in purchase decisions are operationalized. Second, how customers search for products priced dynamically, differentiated by business and private customers, as well as by different devices used for the search. Third, whether and how dynamic pricing influences the impact of internal reference prices on purchase decisions. Finally, this dissertation demonstrates that consumers perceive price changes as personalized in different purchase contexts, leading to reduced perceptions of fairness and undesirable behavioral consequences.

Download or read book Study of Customer Behavior in a Revenue Management Setting Using Data driven Approaches written by Sareh Nabi-Abdolyousefi and published by . This book was released on 2018 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this study is to propose novel dynamic pricing mechanisms in the presence of strategic customers using data-driven approaches. Dynamic pricing is the latest trend in pricing strategies and allows optimal response to real-time demand and supply information. Firms often face uncertainties when making pricing decisions. One of the uncertainties often involved is unknown demand. Therefore, businesses seek to optimize revenue while learning demand and reducing the uncertainty involved in setting prices. Understanding consumer decision-making is another crucial aspect of pricing in revenue management. One of the detrimental effects of dynamic pricing is that it invokes a type of behavior in customers that is referred to as forward-looking, or strategic, in revenue management literature. The strategic customer considers future price decreases, and purchases the product if his or her discounted surplus is higher than the immediate surplus. In chapters 1 and 2, we study a retailer who is pricing dynamically to maximize his expected cumulative revenue. We assume that the retailer has no information regarding expected demand nor the type of customers he is facing, whether they are myopic or strategic in their shopping behavior. In the problem of dynamic pricing under demand uncertainty, we face an inherent trade-off between the exploration involved in learning demand and the exploitation which occurs due to revenue maximization. One way of modeling this trade-off is using the multi-arm bandit modeling approach. Many algorithms have been proposed to solve stochastic multi-arm bandit problems. Our focus is on the Thompson Sampling (TS) algorithm which takes a Bayesian approach and was introduced by William R. Thompson. We propose a pricing mechanism called Strategic Thompson Sampling algorithm which is built upon the TS algorithm. Our main contribution in these two chapters is to merge the literature on strategic behavior with the literature on dynamic pricing and demand learning based on the classical multi-arm bandit modeling approach. In these chapters, the retailer is applying our proposed Strategic Thompson Sampling algorithm to learn expected demand in an exploration-versus-exploitation fashion. We start our analysis with a Bernoulli demand scenario in chapter 1 and extend our work to a Normal demand scenario in chapter 2. For both Bernoulli and Normal demand scenarios, we demonstrate numerically that the retailer's long run price offer decreases as the patience level of the strategic customer increases. We further show that the retailer can be better off in terms of his expected cumulative revenue when facing strategic customers. One potential explanation for this observation is the retailer's lower exploration of non-optimal arms in the presence of strategic customers rather than myopic ones. Our intuition is analytically and numerically confirmed for both Bernoulli and Normal demand scenarios. We further provide and compare expected regret bounds on the retailer's expected cumulative revenue for both types of customers. We conclude that the retailer's regret is lower when facing strategic customers as compared to myopic ones. Our objective in chapter 3 is to improve our starting point by building an informative prior and more specifically, an empirical Bayes prior for the Bayesian online learning algorithm that performs binary prediction. The underlying model used in this chapter is a Bayesian Linear Probit (BLIP) model which performs binary classification on a public data set called "Census Income Data Set". Our goal is to build an informative prior using a portion of the training data set and start the BLIP model with the built-in prior rather than the non-informative standard Normal distributions. We further compare the prediction accuracies of the BLIP model with informative and non-informative priors. An empirical Bayes model (Blip with empirical Bayes prior) has been implemented recently in the production system of one of the largest online retailers. The web-lab experiment is currently running.

Download or read book Dynamic Pricing in a Distribution Channel in the Presence of Switching Costs written by Koray Cosguner and published by . This book was released on 2017 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We advance the literature on dynamic oligopoly pricing models in the presence of switching costs by additionally modeling the strategic pricing role of the retailer within the distribution channel. In doing this, we study the relative dynamic pricing implications of how current retail and wholesale prices for a brand must optimally take into account past and future demand, respectively, for the brand. Using scanner data from the cola market, we find that while the retailer exploits the benefit of inertial demand by appropriately increasing the retail profit margin, the cost of investing is borne entirely by the manufacturers. We use simulation studies to show how the retailer will lose its ability to leverage the benefits of inertial demand as consumers become more price sensitive. We also show that when inertia of the more price-sensitive customer segment increases, the aggregate welfare of consumers, the retailer, and manufacturers may increase.

Download or read book Proceedings of the Eleventh International Forum on Decision Sciences written by Xiang Li and published by Springer Nature. This book was released on with total page 474 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Theory and Practice of Revenue Management written by Kalyan T. Talluri and published by Springer Science & Business Media. This book was released on 2006-02-21 with total page 731 pages. Available in PDF, EPUB and Kindle. Book excerpt: Revenue management (RM) has emerged as one of the most important new business practices in recent times. This book is the first comprehensive reference book to be published in the field of RM. It unifies the field, drawing from industry sources as well as relevant research from disparate disciplines, as well as documenting industry practices and implementation details. Successful hardcover version published in April 2004.

Download or read book Operationalizing Dynamic Pricing Models written by Steffen Christ and published by Springer Science & Business Media. This book was released on 2011-04-02 with total page 363 pages. Available in PDF, EPUB and Kindle. Book excerpt: Steffen Christ shows how theoretic optimization models can be operationalized by employing self-learning strategies to construct relevant input variables, such as latent demand and customer price sensitivity.

Download or read book Cyclic Pricing with Strategic Waiting Customers and Population Dynamics written by Zheyi Li and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider continuous-time dynamic pricing in the presence of strategic waiting customers and their population dynamics. The firm makes the pricing decision with a finite menu of prices each time. Customers arrive at a constant rate with heterogeneous valuations. Customers purchase if the current price is less than their corresponding valuations. The remaining customers are strategic: they may leave or wait for future clearance sales, and the leaving rate can be population-contingent. The firm has the option to offer a clearance price to attract all waiting customers to purchase. We build a continuous-time model by exploiting impulse control. For a two-price menu, the optimal pricing policy is a cyclic pricing strategy that starts with a regular price and ends at a clearance price. For a multi-price menu, in contrast to the existing literature, we show that the optimal dynamic pricing policy can be either a textit{pump and dump cyclic} or textit{generalized pump and dump cyclic} strategy. Which strategy is optimal is determined by the sign of the effective marginal leaving rate. We provide analytical solutions for the cycle length and the optimal pricing path. Our results provide new explanations for the popularity of periodic clearance sales with penetration pricing and skimming pricing in practice. Our findings also provide guidelines on carrying out dynamic pricing with the customer leaving behaviors. Numerically, we show that ignoring cyclic pricing in the presence of strategic waiting customers can lead to a significant profit loss.

Download or read book New Developments in the Analysis of Market Structure written by International Economic Association and published by MIT Press. This book was released on 1986 with total page 588 pages. Available in PDF, EPUB and Kindle. Book excerpt: These contributions discuss a number of important developments over the past decade in a newly established and important field of economics that have led to notable changes in views on governmental competition policies. They focus on the nature and role of competition and other determinants of market structures, such as numbers of firms and barriers to entry; other factors which determine the effective degree of competition in the market; the influence of major firms (especially when these pursue objectives other than profit maximization); and decentralization and coordination under control relationships other than markets and hierarchies.ContributorsJoseph E. Stiglitz, G. C. Archibald, B. C. Eaton, R. G. Lipsey, David Enaoua, Paul Geroski, Alexis Jacquemin, Richard J. Gilbert, Reinhard Selten, Oliver E. Williamson, Jerry R. Green, G. Frank Mathewson, R. A. Winter, C. d'Aspremont, J. Jaskold Gabszewicz, Steven Salop, Branko Horvat, Z. Roman, W. J. Baumol, J. C. Panzar, R. D. Willig, Richard Schmalensee, Richard Nelson, Michael Scence, and Partha Dasgupta

Download or read book Proceedings of the Tenth International Conference on Management Science and Engineering Management written by Jiuping Xu and published by Springer. This book was released on 2016-08-23 with total page 1697 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents the proceedings of the Tenth International Conference on Management Science and Engineering Management (ICMSEM2016) held from August 30 to September 02, 2016 at Baku, Azerbaijan and organized by the International Society of Management Science and Engineering Management, Sichuan University (Chengdu, China) and Ministry of Education of Azerbaijan. The aim of conference was to foster international research collaborations in management science and engineering management as well as to provide a forum to present current research findings. The presented papers were selected and reviewed by the Program Committee, made up of respected experts in the area of management science and engineering management from around the globe. The contributions focus on identifying management science problems in engineering, innovatively using management theory and methods to solve engineering problems effectively and establishing novel management theories and methods to address new engineering management issues.