Download or read book Optimal dynamic pricing for new products in the presence of network externalities written by Jinhong Xie and published by . This book was released on 1991 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Optimal Pricing for the Growth of Innovations with Direct Network Externalities written by Mohammad G. Nejad and published by . This book was released on 2013 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Purpose - This study explores optimal pricing strategies for innovations with direct network externalities. The utility of these innovations increases with the number of adopters and thus the innovation takeoff requires a certain number of adopters. Design/methodology/approach - Agent-based Modeling and Simulation.Findings - The relationship between price and NPV of revenue resembles an asymmetric inverse U-shape. Low-pricing strategy outperforms high-pricing, while a moderate pricing strategy outperforms both low- and high-pricing strategies. Moreover, heterogeneity of consumer price sensitivity positively affects NPV of sales.Practical implications - Pricing durable new products with network externalities are more challenging than other types of innovations. The price pattern of most new durable products are out of the control of firms and historical data indicates that the price of such innovations drops over time which further highlights the importance of their introductory pricing. The results indicate that firms can maximize their NPV by adopting a moderate pricing strategy. Moreover, firms must consider heterogeneity of consumer price sensitivity along with the market price elasticity when making pricing decisions. Detailed strategic implications and recommendations are discussed.Originality/value - Several recent studies have called for studying pricing strategies for new products with network externalities. The study findings challenge the common wisdom that a penetration pricing strategy is an optimal approach for durable products with network externalities. Moreover, while other studies have highlighted the importance of market price elasticity, extensive simulation experiments conducted in this study shows that heterogeneity of consumer price sensitivity is an important factor that must be considered. Finally, the study presents an agent-based modeling approach for exploring optimal pricing innovations with network externalities.

Download or read book Dynamic Pricing in Social Networks written by Amir Ajorlou and published by . This book was released on 2015 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the problem of optimal dynamic pricing for a monopolist selling a product to consumers in a social network. In the proposed model, the only means of spread of information about the product is via Word of Mouth communication; consumers' knowledge of the product is only through friends who already know about the product's existence. Both buyers and non-buyers contribute to information diffusion while buyers are more likely to get engaged. By analyzing the structure of the underlying endogenous process, we show that the optimal dynamic pricing policy for durable products with zero or negligible marginal cost, drops the price to zero infinitely often. By attracting low-valuation agents with free-offers and getting them more engaged in the spread, the firm can reach out to potential high-valuation consumers in parts of the network that would otherwise remain untouched without the price drops. We provide evidence for this behavior from smartphone app market, where price histories indicate frequent free-offerings. Moreover, we show that despite infinitely often drops of the price to zero, the optimal price trajectory does not get trapped near zero. We demonstrate the validity of our results in face of strategic forward-looking agents, homophily-based engagement in word of mouth, network externalities, and consumer inattention to price changes. We further unravel the key role of the product type in the drops by showing that the price fluctuations disappear after a finite time for a nondurable product.

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 Optimal Pricing Policy in the Presence of Positive and Negative Network Effects written by Nako Iwaji and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose an optimal pricing model for products with both positive and negative network effects. A closed-form expression of the optimal pricing policy is derived under the assumption that the demand function is linear. When there are two customer types with different attitudes towards congestion, the monotonicity of the optimal price differs according to the price sensitivity of each customer type. We show that even if the number of customers who are averse to congestion increases, if the negative-type price sensitivity is low and the positive network effect is weak, increasing the optimal price will increase total profit.

Download or read book Essays on Economics of Information written by Anastasiia Parakhoniak and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three independent chapters addressing different questions of information economics. The first chapter studies optimal strategies of firms which are present in both offline and online markets. We study optimal pricing strategies of retailers in presence of showrooming and their decisions on distribution channels. Showrooming is a situation where consumers try products at brick-and-mortar stores before purchasing them online at a lower price. One way to prevent showrooming is to use a price matching policy, whereby price is the same in both the physical store and the online channel. We show that for small search costs, a price matching policy is indeed optimal. However for higher search costs price matching is suboptimal, and online and offline purchases coexist with showrooming. A firm which faces online competition from a foreign multichannel retailer has an incentive to geo-block, i.e. refuse to serve foreign customers, even though it leads to a decrease in potential demand. Geo-blocking relaxes online competition and leads to higher prices both online and in brick-and-mortar stores. A legal price parity requirement helps to eliminate incentives to geo-block and thus restores online competition. The second chapter analyzes information diffusion process in communication networks where social interactions are costly. We provide a dynamic model with strategic agents who decide how much effort to put into the propagation of information about a product in each period. We show that the equilibrium level of the individual communication effort is convex in the proportion of informed agents, and lower than the socially optimal level due to the substantial free-riding effect. We show that for sufficiently high recommendation cost it is socially optimal that symmetric agents exert the same communication effort while for low recommendation cost this is not true. In the context of our model we analyze the advertising strategy of the firm launching a new product with positive network externalities for consumers. The analysis shows that the outcome of advertisement is decreasing fast with the proportion of informed consumers due to the free-riding effect. Thus, optimally the firm has to adjust and reduce the level of advertising in each period. The third chapter is a co-authored paper with Maarten Janssen and Alexei Parakhonyak. In this paper we propose a new equilibrium concept of Non-reservation price equilibria (Non-RPE). Reservation price equilibria (RPE) do not accurately assess market power in consumer search markets. In most search markets, consumers do not know important elements of the environment in which they search (such as, for example, firms' cost). We argue that when consumers learn when searching, RPE suffer from theoretical issues, such as non-existence and critical dependence on specific out-of-equilibrium beliefs. We characterize equilibria where consumers rationally choose search strategies that are not characterized by a reservation price. Non-RPE always exist and do not depend on specific out-of-equilibrium beliefs. Non-RPE have active consumer search and are consistent with recent empirical findings.

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 Channel Strategies and Marketing Mix in a Connected World written by Saibal Ray and published by Springer Nature. This book was released on 2019-12-14 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book aims to revisit the “traditional” interaction between channel strategies and the marketing mix in a connected world. In particular, it focuses on the following four dimensions in this context: Consumers, Products, Value Proposition and Sustainability. Keeping in mind the growing digitalization of business processes in the retail world and the move towards omni-channel retailing, the book introduces the state-of-the-art academic and practitioner studies along these dimensions that could enhance the understanding of the potential impact that new technologies and strategies can have on practice in the near future. When launching a new product/service to market, firms usually consider various components of the marketing mix to influence consumers’ purchase behaviors, such as product design, convenience, value proposition, promotions, sustainability initiatives, etc. This mix varies depending on the specific channel and consumer niche that the firm is targeting. But this book shows how channel strategy also influences the effectiveness in utilizing the marketing mix to attract potential customers.

Download or read book Dynamic Allocation and Pricing written by Alex Gershkov and published by MIT Press. This book was released on 2024-06-11 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 Network Externalities Demand Inertia and Dynamic Pricing in an Experimental Oligopoly Market written by Ralph C. Bayer and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes dynamic pricing in markets with network externalities. Network externalities imply demand inertia, because the size of a network increases the usefulness of the product for consumers. Because past sales increase current demand, firms have an incentive to set low introductory prices to be able to increase prices as their networks grow. However, in reality we observe decreasing prices. This could be due to other factors dominating the network effects. We use an experimental duopoly market with demand inertia to isolate the effect of network externalities. We find that experimental prices are consistent with real world observations rather than with theoretical predictions.

Download or read book Dynamic Pricing and Inventory Management in the Presence of Online Reviews written by Nan Yang and published by . This book was released on 2018 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the joint pricing and inventory management problem in the presence of online customer reviews. Customers who purchase the product may post reviews that would influence future customers' purchasing behaviors. Under the common practice of customer-generated reviews on e-commerce platforms, rigorous investigation of their operational implications offers valuable insights and guidance for both the research community and practitioners. We develop a stochastic joint pricing and inventory management model to characterize the optimal policy in the presence of online reviews. We show that a rating-dependent base-stock/list-price policy is optimal. Interestingly, the inventory dynamics of the firm do not influence the optimal policy as long as the initial inventory is below the initial base-stock level. Hence, we can reduce the dynamic program that characterizes the optimal policy to one with a single-dimensional state-space (the aggregate net rating). The presence of online reviews gives rise to the trade-off between generating current profits and inducing future demands, thus having several important implications upon the firm's operations decisions. First, online reviews drive the firm to deliver a better service and attract more customers to post a review. Hence, the safety-stock and base-stock levels are higher in the presence of online reviews. Second, the evolution of the aggregate net rating process follows a mean-reverting pattern: When the current rating is low (resp. high), it has an increasing (resp. decreasing) trend in expectation. Third, although myopic profit optimization leads to significant optimality losses in the presence of online reviews, balancing the current profits and near-future demands suffices to exploit the network effect induced by online reviews. We propose a dynamic look-ahead heuristic policy that well leverages this idea and achieves small optimality gaps which decay exponentially in the length of the look-ahead time-window.

Download or read book Dissertation Abstracts International written by and published by . This book was released on 2003 with total page 628 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 Strategies for New Products with Extended Warranty Contracts written by Shengqiu Zhang and published by Open Dissertation Press. This book was released on 2017-01-27 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Dynamic Pricing Strategies for New Products With Extended Warranty Contracts" by Shengqiu, Zhang, 张盛球, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: An extended warranty provides consumers the opportunity to rectify product failures at little or no cost after the expiry of the base warranty. Empirical evidence has shown that the selling of extended warranty contract (EWC) has become a profitable business in many manufacturing and retail industries. This thesis investigates the dynamic pricing problem for a new product with the option of purchasing an extended warranty contract (EWC). The research simultaneously determines the pricing strategies for both the product and the associated EWC, and the production rate to maximize the manufacturer's long-term total profit. The results show that the provision of EWC will significantly affect the optimal pricing strategy for the new product, and may also affect its optimal production plan. The research establishes three mathematical models for making optimal pricing decisions under different operational settings. The first model considers a centralized selling system in which the manufacturer sells the product and offers the associated EWC to the consumer directly. The second model extends the first one by incorporating the production and inventory decisions in the analysis. The third model considers a decentralized system in which the manufacturer sells the new product to consumers through an independent retailer. The EWC can be offered either by the manufacturer or by the retailer. It is shown that each scenario leads to a differential Stackelberg game in which the manufacturer and the retailer are players. For the first model, the Pontryagin maximum principle is used to derive the necessary condition for the optimal pricing strategies for both the new product and the associated EWC. Some properties for pricing the new product optimally are then studied. Apart from analysing the characteristics of the optimal pricing strategy under general demand conditions, closed-form solutions for the problem are also derived for some specific demand functions. In cases where closed-form solutions cannot be found, a gradient algorithm is applied to solve the problem numerically. In the second model, the production rate becomes a decision variable because the unit production cost depends on the chosen production rate. Results of the analysis show that the optimal selling price for the EWC remains the same as that in the first model, while the optimal selling price for the new product are affected by the production rate. The results also show that the gradient algorithm fails to converge, thus is no longer suitable for the second model due to the complexity caused by the boundary conditions. A more robust control vector parameterization method is then developed to compute the numerical solution. Analysing the third model theoretically indicates that some necessary conditions related to the optimal wholesale price and the optimal retail price must be satisfied for the existence of an open-loop Stackelberg equilibrium. Some important managerial insights are derived on the basis of the properties characterizing the optimal solution. The control vector parameterization method is then further developed to solve the differential game problem. Numerical experiments are then carried out to demonstrate which distribution channel results in the largest profit. DOI: 10.5353/th_b5435661 Subjects: Warranty Pricing

Download or read book Handbook of Industrial Organization written by Richard Schmalensee and published by Elsevier. This book was released on 1989 with total page 943 pages. Available in PDF, EPUB and Kindle. Book excerpt: Annotation This is Vol 3 of the Handbook of Industrial Organization series (HIO). Vols 1 & 2 published simultaneously in 1989 under the editorship of Richard Schmalensee and Robert Willig. Many of the chapters in these successful volumes were widely cited and appeared on graduate reading lists, and some continue to appear even recently. Since the first volumes published, the field of industrial organization has continued to evolve. As the editors acknowledge in the Preface, these volumes had some gaps and this new volume aims to fill some of those gaps. The aim is to serve as a source, reference and teaching supplement for industrial organization, or industrial economics, the microeconomics field that focuses on business behavior and its implications for both market structures and processes, and for related public policies. The first two volumes of the HIO appeared at roughly the same time as Jean Tirole's book The Theory of Industrial Organization. Together they helped revolutionize the teaching of industrial organization, and provided a state-of-the-art summary. Tirole's book is concerned with the relevant theory, and several reviewers noted that the first two volumes of HIO contained much more discussion of the theoretical literature than of the empirical literature. In most respects, this imbalance was an accurate reflection of the field. Since then, the empirical literature has flourished, while the theoretical literature has continued to grow, and this new volume reflects that change of emphasis. *Part of the renown Handbooks in Economics series *Chapters are contributed by some of the leading experts in their fields. *A source, reference and teaching supplement for industrial organizations, or industrial economicists.

Download or read book Networks written by Kurt Geihs and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 205 pages. Available in PDF, EPUB and Kindle. Book excerpt: New information and communication technologies unquestionably brought about enormous changes that resulted in an ever-increasing networked society. Indeed, there is no area in the social and economic world which is unaffected by the recent advances. In response to these changes scientists from numerous disciplines teamed up in 1997 to lay a foundation for a common theory of networks. The objective was to gain a deeper understanding of the mechanisms behind social, economic, technical and other kinds of networks in order to develop a unified theory of networks. Such a theory would then guide public and private decisions concerning the planning, operations and controlling of all kinds of networks. The contributions in this book represent the first steps toward this ambitious goal.

Download or read book Handbook of Pricing Research in Marketing written by Vithala R. Rao and published by Edward Elgar Publishing. This book was released on 2009 with total page 617 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pricing is an essential aspect of the marketing mix for brands and products. Further, pricing research in marketing is interdisciplinary, utilizing economic and psychological concepts with special emphasis on measurement and estimation. This unique Handbook provides current knowledge of pricing in a single, authoritative volume and brings together new cutting-edge research by established marketing scholars on a range of topics in the area. The environment in which pricing decisions and transactions are implemented has changed dramatically, mainly due to the advent of the Internet and the practices of advance selling and yield management. Over the years, marketing scholars have incorporated developments in game theory and microeconomics, behavioral decision theory, psychological and social dimensions and newer market mechanisms of auctions in their contributions to pricing research. These chapters, specifically written for this Handbook, cover these various developments and concepts as applied to tackling pricing problems. Academics and doctoral students in marketing and applied economics, as well as pricing-focused business practitioners and consultants, will appreciate the state-of-the-art research herein.