Download or read book Intertemporal Pricing Under Minimax Regret written by Rene Caldentey and published by . This book was released on 2015 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the pricing problem faced by a monopolist who sells a product to a population of consumers over a finite time horizon. Customers are heterogeneous along two dimensions: (i) willingness-to-pay for the product and (ii) arrival time during the selling season. We assume that the seller knows only the support of the customers' valuations and do not make any other distributional assumptions about customers' willingness-to-pay or arrival times. We consider a robust formulation of the seller's pricing problem which is based on the minimization of her worst-case regret, a framework first proposed by Bergemann and Schlag (2008) in the context of static pricing. We consider two distinct cases of customers' purchasing behavior: myopic and strategic customers. For both of these cases, we characterize optimal price paths. For myopic customers, the regret is determined by the price at a critical time. Depending on the problem parameters, this critical time will be either the end of the selling season or it will be a time that equalizes the worst-case regret generated by undercharging customers and the worst-case regret generated by customers waiting for the price to fall. The optimal pricing strategy is not unique except at the critical time. For strategic consumers, we develop a robust mechanism design approach to compute an optimal policy. Depending on the problem parameters, the optimal policy might lead some consumers to wait until the end of the selling season and might price others out of the market. Under strategic customers, the optimal price equalizes the regrets generated by different customer types that arrive at the beginning of the selling season. We show that a seller that does not know if the customers are myopic should price as if they are strategic. We also show there is no benefit under myopic consumers to having a selling season longer than a certain uniform bound, but that the same is not true with strategic consumers.

Download or read book Intertemporal Pricing Strategies written by Ai-Kheng Jasmine Ng and published by . This book was released on 2017-01-27 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Intertemporal Pricing Strategies written by and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Intertemporal Price Discrimination Via Reference Price Effects written by Zizhuo Wang and published by . This book was released on 2015 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider the dynamic pricing problem a monopolistic seller faces when customers arrive in heterogeneous time periods and their purchase decisions are affected by reference prices formed from their past purchase experiences. We illustrate that a new form of price discrimination opportunity exists in such situations, where the seller's optimal pricing strategy is a cyclic one, even when the customers are loss-neutral and their demand functions are identical. This result differs from those in prior studies where the optimal price paths are shown to be asymptotically constant when customer arrival times are homogeneous or when there are no reference price effects, thus is unique due to the interaction between the heterogeneous arrivals and the reference price effects. We also provide the length of the cycle when the demand function is linear. In this era where customer information becomes easier accessible, our results suggest the seller consider this new dimension of price discrimination in conjunction with the old ones, in order to take advantage of the full power of customer data.

Download or read book Intertemporal Price Discrimination with Complementary Products written by Hui Li and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies intertemporal price discrimination (IPD) with complementary products in the context of e-readers and e-books. Using individual-level data (2008-2012), I estimate a dynamic demand model for e-reader adoption and subsequent book quantity, reading format, and retailer choices in several book genres. I use the estimates to simulate a monopolist's optimal dynamic pricing strategies when facing forward-looking consumers. The results illustrate how skimming/penetration pricing incentives for e-readers and harvesting/investing incentives for e-books interact in this novel setting. The optimal joint IPD strategy is skimming for e-readers and investing for e-books. Counterfactual results suggest that combining IPD with complementary product pricing improves firm profitability because it attenuates the limitations of each pricing approach. In a single-product IPD setting, firms' pricing power is limited when consumers anticipate future price changes and delay purchases. Adding complementary products offers firms two pricing instruments; opposite price trajectories provide conflicting incentives for consumers, limiting intertemporal arbitrage. In a static complementary product setting, firms' pricing power is limited when the relative elasticity between the two products is heterogeneous and conflicting among consumers. Adding IPD sorts heterogeneous consumers into different periods and reduces the need to balance across consumer types.

Download or read book Intertemporal Price Discrimination written by Omar Besbes and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a firm's optimal pricing policy under price commitment. The firm's objective is to maximize its long-term average revenue given a steady arrival of strategic customers. In particular, customers arrive over time, are strategic in timing their purchases and are heterogeneous along two dimensions: their valuation for the firm's product and their willingness to wait before purchasing or leaving. The customers' patience and valuation may be correlated in an arbitrary fashion. For this general formulation, we prove that the firm may restrict attention to cyclic pricing policies, which have length at most twice the maximum willingness to wait of the customer population. To efficiently compute optimal policies, we develop a dynamic programming approach which uses a novel state space which is general, enabling to handle arbitrary problem primitives, and that generalizes to finite horizon problems with non-stationary parameters. We analyze the class of monotone pricing policies and establish their suboptimality in general. Optimal policies are, in a typical scenario, characterized by nested sales, where the firm offers partial discounts throughout each cycle, offers a significant discount halfway through the cycle, with the largest discount offered at the end of the cycle. We further establish a form of equivalence between the problem of pricing for a stream of heterogeneous strategic customers and pricing for a pool of heterogeneous customers who may stockpile units of the product.

Download or read book Intertemporal Price Discrimination with Time Varying Valuations written by Victor F. Araman and published by . This book was released on 2020 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: A firm that sells a non perishable product considers intertemporal price discrimination in the objective of maximizing the long-run average revenue. Each period, a number of interested customers approach the firm and can either purchase on arrival, or remain in the system for a period of time. During this time, each customer's valuation changes following a discrete and homogenous Markov chain. Customers leave the system if they either purchase at some point, or their valuations reach an absorbing state v0. We show that, in this context, cyclic strategies are optimal, or nearly optimal. When the pace of intertemporal pricing is constrained to be comparable to customers patience level, we have a good control on the cycle length and on the structure of the optimizing cyclic policies. We also obtain an algorithm that yields the optimal (or near optimal) cyclic solutions in polynomial time in the number of prices. We cast part of our results in a general framework of optimizing the long-run average revenues for a class of payoffs that we call weakly coupled, in which the revenue per period depends on a finite number of neighboring prices.

Download or read book Inter Temporal Pricing with Strategic Customer Behavior written by Xuanming Su and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model of dynamic pricing with endogenous inter-temporal demand. In the model, there is a monopolist who sells a finite inventory over a finite time horizon. The seller adjusts prices dynamically in order to maximize revenue. Customers arrive continually over the duration of the selling season. At each point in time, customers may purchase the product at current prices, remain in the market at a cost in order to purchase later, or exit, and they wish to maximize individual utility. The customer population is heterogeneous along two dimensions: they may have different valuations for the product and different degrees of patience (waiting costs). We demonstrate that heterogeneity in both valuation and patience is important because they jointly determine the structure of optimal pricing policies. In particular, when high-value customers are proportionately less patient, markdown pricing policies are effective because the high-value customers would buy early at high prices while the low-value customers are willing to wait (i.e. they are not lost). On the other hand, when the high-value customers are more patient than the low-value customers, prices should increase over time in order to discourage inefficient waiting. Contrary to intuition, we find that strategic waiting by customers may sometimes benefit the seller: when low-value customers wait, they compete for availability with high-value customers and thus increase their willingness to pay. Our results also shed light on how the composition of the customer population affects optimal revenue, consumer surplus, and social welfare. Finally, we consider the long run problem of selecting the optimal initial stocking quantity.

Download or read book The Strategy and Tactics of Pricing written by Thomas T. Nagle and published by Taylor & Francis. This book was released on 2023-07-31 with total page 361 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Strategy and Tactics of Pricing is the most well-established and influential strategic pricing text available, relied on by practitioners and students globally as a core guide for value-based pricing. The book explains how to balance the ability to create and extract value through from markets by managing pricing decisions in a more strategic and profitable manner. Rather than calculating prices to cover costs or to achieve sales goals, readers will learn to frame more strategic choices that proactively influence customer perceptions of value, manage internal costs, and profitably shift demand curves. This edition features new discussions on harnessing concepts from behavioral economics as well as a refined "value cascade" to help organize the topics covered in this book. Readers will also benefit from: Major revisions to more than a third of the chapters, including an expanded discussion of the role of artificial intelligence and machine learning analytics tools to assist in the evaluation of new pricing opportunities Discussion of many of the new pricing and revenue-recognition models such as consumption-based pricing, outcomes-based pricing, and others An expanded discussion on "Special Topics in Pricing" that cover many of the transformative pricing moves successful companies have made in the past few years in response to major disruptive forces such as the pandemic as well as re-emergent inflation In-chapter textboxes and call-out to highlight different "pricing concepts in action" using actual examples of companies addressing market challenges Chapter summaries and visual aids to help the reader better understand the ideas and concepts presented throughout this book This comprehensive, managerially-focused text is a must-read for students and professionals with an interest in strategic price management and achieving commercial excellence for their organizations. Additional online resources include PowerPoint slides and an instructor’s manual, including exercises, mini-cases, and examination questions.

Download or read book Intertemporal Pricing and Price Discrimination written by Thanasis Stengos and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Intertemporal Price Discrimination with Forward looking Consumers written by Harikesh S. Nair and published by . This book was released on 2006 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Allocation and Pricing written by Alex Gershkov and published by MIT Press. This book was released on 2014-12-12 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new approach to dynamic allocation and pricing that blends dynamic paradigms from the operations research and management science literature with classical mechanism design methods. Dynamic allocation and pricing problems occur in numerous frameworks, including the pricing of seasonal goods in retail, the allocation of a fixed inventory in a given period of time, and the assignment of personnel to incoming tasks. Although most of these problems deal with issues treated in the mechanism design literature, the modern revenue management (RM) literature focuses instead on analyzing properties of restricted classes of allocation and pricing schemes. In this book, Alex Gershkov and Benny Moldovanu propose an approach to optimal allocations and prices based on the theory of mechanism design, adapted to dynamic settings. Drawing on their own recent work on the topic, the authors describe a modern theory of RM that blends the elegant dynamic models from the operations research (OR), management science, and computer science literatures with techniques from the classical mechanism design literature. Illustrating this blending of approaches, they start with well-known complete information, nonstrategic dynamic models that yield elegant explicit solutions. They then add strategic agents that are privately informed and then examine the consequences of these changes on the optimization problem of the designer. Their sequential modeling of both nonstrategic and strategic logic allows a clear picture of the delicate interplay between dynamic trade-offs and strategic incentives. Topics include the sequential assignment of heterogeneous objects, dynamic revenue optimization with heterogeneous objects, revenue maximization in the stochastic and dynamic knapsack model, the interaction between learning about demand and dynamic efficiency, and dynamic models with long-lived, strategic agents.

Download or read book Industrial Organization written by Paul Belleflamme and published by Cambridge University Press. This book was released on 2010-01-07 with total page 725 pages. Available in PDF, EPUB and Kindle. Book excerpt: An innovative graduate textbook that explains modern industrial organization by blending theory with real-world applications.

Download or read book Intertemporal Asset Pricing written by Bernd Meyer and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the mid-eighties Mehra and Prescott showed that the risk premium earned by American stocks cannot reasonably be explained by conventional capital market models. Using time additive utility, the observed risk pre mium can only be explained by unrealistically high risk aversion parameters. This phenomenon is well known as the equity premium puzzle. Shortly aft erwards it was also observed that the risk-free rate is too low relative to the observed risk premium. This essay is the first one to analyze these puzzles in the German capital market. It starts with a thorough discussion of the available theoretical mod els and then goes on to perform various empirical studies on the German capital market. After discussing natural properties of the pricing kernel by which future cash flows are translated into securities prices, various multi period equilibrium models are investigated for their implied pricing kernels. The starting point is a representative investor who optimizes his invest ment and consumption policy over time. One important implication of time additive utility is the identity of relative risk aversion and the inverse in tertemporal elasticity of substitution. Since this identity is at odds with reality, the essay goes on to discuss recursive preferences which violate the expected utility principle but allow to separate relative risk aversion and intertemporal elasticity of substitution.

Download or read book Effects of Cost Information Transparency on Intertemporal Price Discrimination written by Baojun Jiang and published by . This book was released on 2020 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: A firm's product-cost information is increasingly transparent to consumers as the firm itself or third parties publish such information, which reduces consumers' uncertainty for the product's cost. Using a dynamic model of firm pricing with forward-looking consumer choices, this paper assesses how cost transparency affects the firm's intertemporal price discrimination and profit, as well as the consumers' strategic waiting decisions and surplus. Ceteris paribus, if consumers believe a durable product has a lower cost, they will expect a larger future price drop and tend to delay purchases, impeding the firm's ability to engage in intertemporal price discrimination. Without cost transparency, consumers may infer products with higher prices to have higher costs, giving a low-cost firm incentive to mimic a high-cost firm's high price to encourage consumers to buy early. In contrast, a high-cost firm may choose to distort its price to avoid a low-cost firm's price mimicry. Cost transparency reveals the product's true cost to consumers, limiting the low-cost firm's ability to mimic prices. Thus, cost transparency will benefit (harm) a firm with a high (low) cost. In equilibrium, cost transparency will increase the firm's sales volume and induce more consumers to buy the product earlier instead of later, attenuating strategic waiting by consumers. We also find that cost transparency can lead to higher prices and hurt consumers if the firm has a high cost. In expectation, cost transparency leads to higher firm profits and consumer surplus, facilitating a firm's new-product innovation.

Download or read book Dynamic Pricing written by Mark Stenius Roberts and published by . This book was released on 1977 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Innovative Pricing Strategies to Increase Profi ts written by Daniel Marburger and published by Business Expert Press. This book was released on 2012-08-09 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: According to the economic theory of the firm, businesses strive to determine the single price that maximizes profits. In fact, many firms can extract more revenue and increase profits with pricing strategies that are far more innovative than the single-price strategy. However, in the world of pricing, there is no “one size fits all” strategy. Some pricing strategies are better suited to some situations than others. Sam’s Clubs, owned by Walmart Stores, Inc., for example, charge a membership fee for the right to purchase the store’s inventory whereas Walmart Supercenters do not. If Suddenlink Communications bundles Internet, cable, and phone service to increase profits, why does it also sell the same items separately? Is it true that passengers seated next to each other on the same flight might pay dramatically different fares? Inside you’ll learn how various pricing strategies, including price discrimination, two-part tariffs, bundling, peak-load pricing, and dynamic pricing need specific and necessary ingredients in order to succeed. The authors show you how to use microeconomic theory to determine which pricing strategies will succeed, and under what conditions.