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Author: Chia-Wei Kuo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Although take-it-or-leave-it pricing is the main mode of operation for many retailers, a number of retailers discreetly allow price negotiation when some haggle-prone customers ask for a bargain. At these retailers, the posted price, which itself is subject to dynamic adjustments in response to the pace of sales during the selling season, serves two important roles: (i) it is the take-it-or-leave-it price to many customers who do not bargain, and (ii) it is the price from which haggle-prone customers negotiate down. In order to effectively measure the benefit of dynamic pricing and negotiation in such a retail environment, one must take into account the interactions among inventory, dynamic pricing, and negotiation. The outcome of the negotiation (and the final price a customer pays) depends on the inventory level, the remaining selling season, the retailer's bargaining power, and the posted price. We model the retailer's dynamic pricing problem as a dynamic program, where the revenues from both negotiation and posted pricing are embedded in each period. We characterize the optimal posted price and the resulting negotiation outcome as a function of inventory and time. We also show that negotiation is an effective tool to achieve price discrimination, particularly when the inventory level is high and/or the remaining selling season is short even when implementing negotiation is costly.
Author: Chia-Wei Kuo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Although take-it-or-leave-it pricing is the main mode of operation for many retailers, a number of retailers discreetly allow price negotiation when some haggle-prone customers ask for a bargain. At these retailers, the posted price, which itself is subject to dynamic adjustments in response to the pace of sales during the selling season, serves two important roles: (i) it is the take-it-or-leave-it price to many customers who do not bargain, and (ii) it is the price from which haggle-prone customers negotiate down. In order to effectively measure the benefit of dynamic pricing and negotiation in such a retail environment, one must take into account the interactions among inventory, dynamic pricing, and negotiation. The outcome of the negotiation (and the final price a customer pays) depends on the inventory level, the remaining selling season, the retailer's bargaining power, and the posted price. We model the retailer's dynamic pricing problem as a dynamic program, where the revenues from both negotiation and posted pricing are embedded in each period. We characterize the optimal posted price and the resulting negotiation outcome as a function of inventory and time. We also show that negotiation is an effective tool to achieve price discrimination, particularly when the inventory level is high and/or the remaining selling season is short even when implementing negotiation is costly.
Author: Meinolf Sellmann
Publisher: Springer Nature
ISBN: 3031445058
Category : Mathematics
Languages : en
Pages : 628
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Book Description
This book constitutes the refereed proceedings of the 17th International Conference on Learning and Intelligent Optimization, LION-17, held in Nice, France, during June 4–8, 2023. The 40 full papers presented have been carefully reviewed and selected from 83 submissions. They focus on all aspects of unleashing the potential of integrating machine learning and optimization approaches, including automatic heuristic selection, intelligent restart strategies, predict-then-optimize, Bayesian optimization, and learning to optimize.
Author: Institute for Operations Research and the Management Sciences. National Meeting
Publisher:
ISBN:
Category : Industrial management
Languages : en
Pages : 644
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Author: Yuefeng Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Strategic inventory plays a vital role in a manufacturer-retailer dynamic contract. By holding inventories in a period, the retailer curtails the manufacturer's pricing power in the next period and alleviates double marginalization, significantly increasing the manufacturer's and retailer's profits and improving consumer surplus. The retailer's strategic inventory stems from strategic consideration (dynamic games) regardless of uncertainties, fluctuations, capacities, etc. In this paper, we investigate how consumers' strategic inventory (i.e., consumer stockpiling) alters the retailer's strategic inventory as well as the subgame perfect equilibrium. We extend the model of Anand et al. (2008) by adding Buy-One-Get-One (BOGO) promotions in the first period. We show that the retailer has a strong motive to transfer inventory to consumers. Our results hold if consumers are myopic or strategic and anticipate the price in the second period. We also examine our results in a multi-period model over a finite horizon. To compare BOGO to cash-mail-in rebates, we study a manufacturer-to-consumer BOGO in such a dynamic contract. The result reveals that, unlike rebates, the manufacturer does not offer BOGO to consumers but the retailer does, implying that the pricing scheme with BOGO differs from rebates. Finally, we extend our base model to three production cost structures: (1) fixed setup cost; (2) diseconomies of scale; and (3) production cost savings, and find that the cost structure has a significant impact on the optimal supply chain inventory and BOGO promotions decisions.
Author: Wen Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
We study an average-cost stochastic inventory control problem in which the firm can replenish inventory and adjust price at anytime. We establish the optimality to change the price from low to high in each replenishment cycle as inventory is depleted. With costly price adjustment, scale economies of inventory replenishment are reflected in the cycle time instead of lot size -- An increased fixed ordering cost leads to an extended replenishment cycle but does not necessarily increase the order quantity. A reduced marginal cost of ordering calls for an increased order quantity, as well as speeding up product selling within a cycle. We derive useful properties of the profit function that allows for reducing computational complexity of the problem. For systems requiring short replenishment cycles, the optimal solution can be easily computed by applying these properties. For systems requiring long replenishment cycles, we further consider a relaxed problem that is computational tractable. Under this relaxation, the sum of fixed ordering cost and price adjustment cost is equal to (greater than, less than) the total inventory holding cost within a replenishment cycle when the inventory holding cost is linear (convex, concave) in the stock level. Moreover, under the optimal solution, the time-average profit is the same across all price segments when the inventory holding cost is accounted properly. Through a numerical study, we demonstrate that inventory-based dynamic pricing can lead to significant profit improvement compared with static pricing and limited price adjustment can yield a benefit that is close to unlimited price adjustment. To be able to enjoy the benefit of dynamic pricing, however, it is important to appropriately choose inventory levels at which the price is revised.
Author:
Publisher: Kogan Page Publishers
ISBN: 0749470747
Category : Business & Economics
Languages : en
Pages : 220
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Book Description
Pricing is an emotive and complex topic, demanding an understanding of a number of domains of business knowledge. In this accessible handbook we present practical information and tools to enable the reader to make important decisions knowledgably and confidently, and to explain these decisions to colleagues. The material has a strong Value theme throughout as every pricing decision should be taken within the context of customer value. Cambridge Marketing Handbook: Pricing Points explores essential knowledge and important theory on topics including value, economics, accounting and segmentation. It covers conventional and novel approaches to pricing (competition, cost, value-based and dynamic methods) with contemporary illustrations from B2B, B2C and B2B2C. Real company examples throughout the book are drawn from global consulting practice with major enterprises and state of knowledge content from international conferences.
Author: Yinhan Meng
Publisher:
ISBN:
Category :
Languages : en
Pages : 96
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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.
Author: Ioannis Stamatopoulos
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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We study a model in which a monopoly firm designs the quality profile of its inventory and then dynamically updates its pricing menu for a finite selling horizon to maximize revenue. In a counterfactual scenario, a social planner goes through the same process to maximize total welfare. We show that in both scenarios the problem of dynamically pricing heterogeneous-quality (vertically differentiated) inventories is equivalent to that of dynamically pricing homogeneous-quality inventories, in the sense that a solution to one implies a solution to the other. Moreover, we prove a strong scarcity result, which suggests that the sale of a product drives up the prices on all remaining products, whether of higher or lower quality. We then consider product line design under a production technology that utilizes costly and potentially limited resources. We show that with unlimited (but costly) resources, the revenue maximizer under-supplies quality to all products compared to the social planner. With limited resources, we show that the revenue maximizer exhibits elitism: he over-allocates (under-allocates) resources on the production of high-quality (low-quality) products. However, as the volume of expected consumer arrivals increases to infinity, both the revenue maximizer and the welfare maximizer allocate resources equally across products.
Author: Qi Feng
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
Inventory-based pricing under lost sales is an important, yet notoriously challenging problem in the operations management literature. The vast existing literature on this problem focuses on identifying optimality conditions for a simple management policy, while restricting to special classes of demand functions and to the special case of single-period or long-term stationary settings. In view of the existing developments, it seems unlikely to find general, easy-to-verify conditions for a tractable optimal policy in a possibly nonstationary environment. Instead, we take a different approach to tackle this problem. Specifically, we refine our analysis to a class of intuitively appealing policies, under which the price is decreasing in the post-order inventory level. Using properties of stochastic functions, we show that, under very general conditions on the stochastic demand function, the objective function is concave along such price paths, leading to a simple base stock list price policy. We identify the upper and lower boundaries for a candidate set of decreasing price paths and show that any decreasing path outside of this set is always dominated by some inside the set in terms of profit performance. The boundary policies can be computed efficiently through a single-dimensional search. An extensive numerical analysis suggests that choosing boundary policies yields close-to-optimal profit--in most instances, one of the boundary policies indeed generates the optimal profit, even when they are not, the profit loss is very marginal.
Author: Régis Chenavaz
Publisher:
ISBN:
Category :
Languages : en
Pages :
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