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Author: Sajjad Najafi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We study a firm offering a line of vertically differentiated perishable products with fixed initial inventory over a finite sales season. Consumers arrive at the firm randomly and inspect products sequentially until they find a product to purchase (if any). Consumers evaluate each product in terms of its overall utility revealed to them. Each consumer incurs a positive cost to inspect a product and hence may stop the sequential search without inspecting all the available items. Upon a product's inspection, the utility of the product is known to the consumer, who then decides whether to continue the search. We formulate the firm's and consumer's problems using stochastic dynamic programming and determine the consumers' optimal search decision, the firm's optimal price to charge for each product at each time and the optimal sequence in which to show the products to consumers. We show that consumers' optimal stopping rule, under certain conditions, is myopic and takes a threshold structure. We show that it is optimal for the firm to sequence products in decreasing order of product quality. We show that, in some cases, it is optimal for the firm to increase a perishable product's price over time. This result is in stark contrast to the common result from the literature that prices for perishable products should be reduced over time. However, the fact that a consumer may not be able to see all products during the search can cause the opposite price behavior.
Author: Sajjad Najafi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We study a firm offering a line of vertically differentiated perishable products with fixed initial inventory over a finite sales season. Consumers arrive at the firm randomly and inspect products sequentially until they find a product to purchase (if any). Consumers evaluate each product in terms of its overall utility revealed to them. Each consumer incurs a positive cost to inspect a product and hence may stop the sequential search without inspecting all the available items. Upon a product's inspection, the utility of the product is known to the consumer, who then decides whether to continue the search. We formulate the firm's and consumer's problems using stochastic dynamic programming and determine the consumers' optimal search decision, the firm's optimal price to charge for each product at each time and the optimal sequence in which to show the products to consumers. We show that consumers' optimal stopping rule, under certain conditions, is myopic and takes a threshold structure. We show that it is optimal for the firm to sequence products in decreasing order of product quality. We show that, in some cases, it is optimal for the firm to increase a perishable product's price over time. This result is in stark contrast to the common result from the literature that prices for perishable products should be reduced over time. However, the fact that a consumer may not be able to see all products during the search can cause the opposite price behavior.
Author: Sajjad Najafi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
I study the dynamic pricing problem of a firm selling limited inventory of multiple differentiated products over a finite planning horizon, where the firm wishes to maximize the expected revenue. I formulate the firm's optimization problem as a Markov decision process and investigate the pricing problem in the presence of a variety of operational settings. First, I integrate consumer's sequential search behavior into the pricing problem. The consumer inspects products one at a time by incurring non-zero search cost, and makes decision by comparing the utility of the best product so far versus the reservation utility, a threshold at which the consumer is indifferent between continuation and stopping of the sequential search. The firm aims at maximizing the expected revenue by offering the products in the right sequence and at the right prices. I analytically derive the optimal prices in each period. I show that under some condition it is optimal to present products in the descending order of quality. Second, I address a problem in which the firm is subject to a set of sales volume constraints required to be satisfied at different time points along the sales horizon. Due to stochastic nature of sales, I incorporate a risk measure that allows the firm to manage the total sales while the expected revenue is maximized. I formulate the problem as a chance-constrained dynamic programming and show that the Karush-Kuhn-Tucker conditions are not only necessary but also sufficient for the optimal price. Third, I assimilate consumer's consideration sets to the dynamic pricing problem. When to make a purchase decision, consumers use a two-stage decision-making process, i.e., consumers constitute a consideration set including a subset of the available products using a screening rule (e.g., brands, quality, and budget), and they only evaluate the products in the consideration set using a utility comparison process and opt for the product with the maximum utility. I show that the first-order condition is sufficient for the optimal price of products if consumers apply a quality-based screening rule.
Author: Alexei Parakhonyak
Publisher: Rozenberg Publishers
ISBN: 9036101786
Category :
Languages : en
Pages : 139
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Book Description
Author: David Prakash
Publisher: BoD – Books on Demand
ISBN: 3756863514
Category : Business & Economics
Languages : en
Pages : 155
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Book Description
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.
Author: Elena D'Agostino
Publisher: Springer
ISBN: 3319131141
Category : Law
Languages : en
Pages : 84
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Book Description
This book examines the most controversial issues concerning the use of pre-drafted clauses in fine print, which are usually included in consumer contracts and presented to consumers on a take-it-or-leave-it basis. By applying a multi-disciplinary approach that combines consumer’s psychology and seller’s drafting power in the logic of efficiency and good faith, the book provides a fresh and unconventional analysis of the existing literature, both theoretical and empirical. Moving from the unconscionability doctrine, it criticizes (and in some cases refutes) its main conclusions based on criteria which are usually invoked to sustain the need for public intervention to protect consumers, and specifically related to Law (contract complexity), Psychology (consumer lack of sophistication criterion) and Economics (market structure criterion). It also analyzes the effects of different regulations, such as banning vexatious clauses or mandating disclosure clauses, showing that none of them protect consumers, but in fact prove to be harmful when consumers are more vulnerable, that is whenever sellers can exploit some degree of market power. In closing, the book combines these disparate aspects, arguing that the solution (if any) to the problem of consumer exploitation and market inefficiency associated with the use of contracts of adhesion in these contexts cannot be found in removing or prohibiting hidden clauses, but instead has to take into account the effects of these clauses on the contract as a whole.
Author: Yixuan Zhai
Publisher:
ISBN: 9781369343229
Category :
Languages : en
Pages :
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Book Description
We study sequential decision-making problems in the presence of uncertainty in dynamic pricing, intrusion detection, and routing in communication networks. A decision maker is usually able to learn from the feedback (observations) in sequential decision-making problems. We consider designing optimal strategies and analyze their performance. In the first part, we consider a dynamic pricing problem under unknown demand models. We start with a monopoly dynamic pricing problem. In this problem, a seller offers prices to a stream of customers and observes either success or failure in each sale attempt. The underlying demand model is unknown to the seller and can take one of M possible forms. We show that this problem can be formulated as a multi-armed bandit with dependent arms. We propose a dynamic pricing policy based on the likelihood ratio test. It is shown that the proposed policy achieves complete learning, i.e. it offers a bounded regret where regret is defined as the revenue loss with respect to the case with a known demand model. This is in sharp contrast with the logarithmic growing regret in multi-armed bandit with independent arms. Later, we consider an oligopoly dynamic pricing problem with a finite uncertainty of demand models. Besides just considering the learning efficiency, we assume that sellers are individually rational and consider strategies within the set of certain kind of equilibria. We formulate the oligopoly problem as a repeated Bertrand game with incomplete information. Two scenarios are investigated, sellers with equal marginal costs or asymmetric marginal cost. For the scenarios with equal marginal costs, we developed a dynamic pricing strategy called Competitive and Cooperative Demand Learning (CCDL). Under CCDL, all sellers would collude and obtain the same average total profit as a monopoly. The strategy is shown to be a subgame perfect Nash equilibrium and Pareto efficient. We further show that the proposed competitive pricing strategy achieves a bounded regret, where regret is defined as the total expected loss in profit with respect to the ideal scenario of a known demand model. For the scenarios with asymmetric marginal costs, a dynamic pricing strategy called Demand Learning under Collusion (DLC) is developed. If sellers are patient enough, a tactic collusion of a subset of sellers may be formed depending on the marginal costs and underlying demand model. Using the limit of means criterion, DLC is shown to be a subgame-perfect and Pareto-efficient equilibrium. The dynamic pricing strategy offers a bounded regret over an infinite horizon. Using discounting criterion, DLC is shown to be subgame-perfect [epsilon]-equilibrium, [epsilon]-efficient and with an arbitrarily small regret. The dual problem as an infinitely repeated Cournot competition is formulated and the economic efficiency measured by the social welfare is discussed between Bertrand and Cournot formulations. In the second part, we consider an intrusion detection problem and formulate it as a dynamic search of a target located in one of K cells with any fixed number of searches. At each time, one cell is searched, and the search result is subject to false alarms. The objective is a policy that governs the sequential selection of the cells to minimize the error probability of detecting the whereabouts of the target within a fixed time horizon. We show that the optimal search policy is myopic in nature with a simple structure. In the third part, we consider the shortest path routing problem in a communication network with random link costs drawn from unknown distributions. A realization of the total end-to-end cost is obtained when a path is selected for communication. The objective is an online learning algorithm that minimizes the total expected communication cost in the long run. The problem is formulated as a multi-armed bandit problem with dependent arms, and an algorithm based on basis-based learning integrated with a Best Linear Unbiased Estimator (BLUE) is developed.
Author: Özalp Özer
Publisher: Oxford University Press (UK)
ISBN: 0199543178
Category : Business & Economics
Languages : en
Pages : 977
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Book Description
A definitive reference to the theory and practice of pricing across industries, environments, and methodologies. It covers all major areas of pricing including, pricing fundamentals, pricing tactics, and pricing management.
Author:
Publisher: Elsevier
ISBN: 0444637656
Category : Business & Economics
Languages : en
Pages : 632
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Book Description
Handbook of the Economics of Marketing, Volume One: Marketing and Economics mixes empirical work in industrial organization with quantitative marketing tools, presenting tactics that help researchers tackle problems with a balance of intuition and skepticism. It offers critical perspectives on theoretical work within economics, delivering a comprehensive, critical, up-to-date, and accessible review of the field that has always been missing. This literature summary of research at the intersection of economics and marketing is written by, and for, economists, and the book's authors share a belief in analytical and integrated approaches to marketing, emphasizing data-driven, result-oriented, pragmatic strategies. Helps academic and non-academic economists understand recent, rapid changes in the economics of marketing Designed for economists already convinced of the benefits of applying economics tools to marketing Written for those who wish to become quickly acquainted with the integration of marketing and economics
Author: Steffen Christ
Publisher: Springer Science & Business Media
ISBN: 3834961841
Category : Business & Economics
Languages : en
Pages : 363
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Book Description
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.
Author: Luis C. Corchón
Publisher: Edward Elgar Publishing
ISBN: 1788112784
Category : Business & Economics
Languages : en
Pages : 547
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Book Description
This second volume of the Handbook includes original contribution by experts in the field. It provides up-to-date surveys of the most relevant applications of game theory to industrial organization. The book covers both classical as well as new IO topics such as mergers in markets with homogeneous and differentiated goods, leniency and coordinated effects in cartels and mergers, static and dynamic contests, consumer search and product safety, strategic delegation, platforms and network effects, auctions, environmental and resource economics, intellectual property, healthcare, corruption, experimental industrial organization and empirical models of R&D.
