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Author: Adam N. Elmachtoub
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
An opaque product is a product where some secondary attribute is not revealed to the customer until after purchase. Selling opaque products has become popular on e-commerce platforms where the hidden attribute is often color or style, thanks to its obvious advantage in risk pooling the demand. The objective of this study is to quantify the value of consumer flexibility that underlies opaque selling. We consider a setting in which an online retailer sells N products that only differ in a certain secondary attribute, and in addition offers a k-opaque option where customers select k products from which the seller allocates one to the customer. We assume that the prices are exogenously set such that q fraction of the customers select the k-opaque option. We refer to the tuple (q,k) as the degree of opacity, where the flexibility of the system is increasing in both q and k. When q=0 or k=1, our setting reduces to traditional non-opaque selling with no flexibility, and when the degree of opacity is (1,N), this corresponds to a fully flexible scenario where every customer is willing to receive any product. We find that even with a minimal degree of opacity where q is very small and k=2, the seller can achieve significant cost savings which we quantify precisely. Remarkably, we find that the cost savings from this minimal degree of opacity is on the same order as the fully flexible case corresponding to (1,N). This finding has practical managerial implications, as achieving (1,N) is practically infeasible since it would require substantial incentives by the seller to materialize. Our proofs rely on analyzing a simple balancing policy to allocate products to opaque customers, and explores a novel connection to the balls-into-bins framework. As a byproduct of our analysis, we show that the simple balancing policy is asymptotically optimal. Finally, we provide numerical experiments that suggest our main insight, namely that a small degree of opacity provides advantages akin to a fully flexible system, holds under various extensions of our core setting.
Author: Adam N. Elmachtoub
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
An opaque product is a product where some secondary attribute is not revealed to the customer until after purchase. Selling opaque products has become popular on e-commerce platforms where the hidden attribute is often color or style, thanks to its obvious advantage in risk pooling the demand. The objective of this study is to quantify the value of consumer flexibility that underlies opaque selling. We consider a setting in which an online retailer sells N products that only differ in a certain secondary attribute, and in addition offers a k-opaque option where customers select k products from which the seller allocates one to the customer. We assume that the prices are exogenously set such that q fraction of the customers select the k-opaque option. We refer to the tuple (q,k) as the degree of opacity, where the flexibility of the system is increasing in both q and k. When q=0 or k=1, our setting reduces to traditional non-opaque selling with no flexibility, and when the degree of opacity is (1,N), this corresponds to a fully flexible scenario where every customer is willing to receive any product. We find that even with a minimal degree of opacity where q is very small and k=2, the seller can achieve significant cost savings which we quantify precisely. Remarkably, we find that the cost savings from this minimal degree of opacity is on the same order as the fully flexible case corresponding to (1,N). This finding has practical managerial implications, as achieving (1,N) is practically infeasible since it would require substantial incentives by the seller to materialize. Our proofs rely on analyzing a simple balancing policy to allocate products to opaque customers, and explores a novel connection to the balls-into-bins framework. As a byproduct of our analysis, we show that the simple balancing policy is asymptotically optimal. Finally, we provide numerical experiments that suggest our main insight, namely that a small degree of opacity provides advantages akin to a fully flexible system, holds under various extensions of our core setting.
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: Serguei Netessine
Publisher: Springer Science & Business Media
ISBN: 0387980261
Category : Business & Economics
Languages : en
Pages : 488
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Book Description
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.
Author: Yi Liu
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
My dissertation focuses on the interface between operations management and marketing. I develop parsimonious models to optimize a firm's supply-side decisions as responses to the consumer behavior decisions they inevitably induce. Given the fact that marketing demand is full of diversity, which ultimately implies heterogeneity in consumer demand, solving supply chain problems can provide significant value to both academia and industry. In my first research, I consider a firm that sells a product defined by both vertical and horizontal attributes to consumers characterized by heterogeneous preferences for the horizontal attribute. In that context, I explore the extent to which a given firm should be transparent versus opaque in describing its product's horizontal attribute. Accordingly, I establish the value of opaque selling by comparing the firm's optimal expected profit against the benchmark expected profit associated with full transparency. I find that opaqueness should increase as the quality level of the vertical attribute increases, such that full transparency is optimal only if the quality level is below a threshold that depends on the product's horizontal attribute. Moreover, I find that optimal opaque selling could yield a win-win in the sense that it could not only increase the firm's profits but also increase consumer surplus, depending on the product's specific attributes. In my second research, I consider the optimal product design question for a firm in a two-segment market characterized by heterogeneous consumer willingness to pay for the product's vertical attribute. The firm's product vertical attribute is currently limited by a technological capability that can be removed if product introduction is delayed by one time period. The question is, what, if any segment should be targeted now and what, if any, should be targeted later. Then I find the threshold of the technological capability and cannibalization for the firm to target each market segment and the time of product introduction.
Author: Hang Ren
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
Problem definition: We study the emerging practice of using opaque selling to dispose of leftover inventory in vertically differentiated markets. With this selling strategy, a firm offers a synthetic product (after the regular selling season) for which consumers do not know the exact identity until after purchase. Academic/practical relevance: This opaque selling strategy is implemented in several industries, e.g., travel and retail. However, its mechanisms are yet to be fully understood as the extant literature considers other settings wherein opaque selling's mechanisms do not carry over to ours. Methodology: We develop a game-theoretic model featuring a firm's inventory and dynamic selling strategies and consumers' strategic waiting. We characterize the optimal inventory levels, product offerings, and prices. Results: We find that, compared to last-minute selling (i.e., selling leftover inventory separately), opaque selling increases regular-season profits by softening inter-temporal cannibalization from sales-season products to high-quality products sold in the regular season. However, it may decrease sales-season profits as products with different qualities are probabilistically allocated to all purchasing consumers, irrespective of their valuations. We further demonstrate that these mechanisms are fundamentally different from those identified in the literature for other settings, and this contrast generates opposite recommendations as for the optimal usage of opaque selling. With endogenous inventory, interestingly, opaque selling is even more attractive and it prompts the firm to procure fewer high-quality products than under last-minute selling. Managerial implications: We demonstrate the value of opaque selling as an inventory clearance strategy in vertical markets. We show that a firm can further strengthen its profitability by combining opaque selling with inventory management. We also provide guidelines on managing inventory and illustrate the non-trivial impact of opaque selling.
Author: Andreas Hinterhuber
Publisher: Routledge
ISBN: 042982291X
Category : Business & Economics
Languages : en
Pages : 165
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Book Description
Pricing can truly transform organizations. The impact of pricing on organizations is a result of two factors: pricing strategy development and the implementation of these strategies. Implementation is arguably the most difficult part in the pricing strategy process where even seasoned practitioners demand guidance. Pricing strategy development requires creativity, analytical rigor, and an ability to master the internal political competition for scarce resources, but it takes place in a well-defined environment. Fast forward to strategy implementation: competitors that stubbornly fail to behave according to assumptions, new entrants, internal resistance, new opportunities, changing customer preferences, leadership changes, regulatory interventions, or market growth rates that change unexpectedly are some of the intervening variables between the pricing strategy originally developed and the strategy actually implemented. This book provides the theories and best practices that enable the effective implementation of pricing strategies. It offers: a best practice overview on how to convert a pricing strategy into superior results insights from current academic research on driving profits via pricing strategy implementation examples on how to deal with digital transformation in the context of pricing tools and insights into how to overcome internal resistance, align the organization, and forge win-win relationships with customers Taking a new approach, Pricing Strategy Implementation is a critical and practical tool for practicing executives and managers, as well as academics and researchers in pricing, marketing strategy, and strategic management.
Author: Steven Nahmias
Publisher: Springer Science & Business Media
ISBN: 1441979999
Category : Business & Economics
Languages : en
Pages : 89
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Book Description
A perishable item is one that has constant utility up until an expiration date (which may be known or uncertain), at which point the utility drops to zero. This includes many types of packaged foods such as milk, cheese, processed meats, and canned goods. It also includes virtually all pharmaceuticals and photographic film, as well as whole blood supplies. This book is the first devoted solely to perishable inventory systems. The book’s ten chapters first cover the preliminaries of periodic review versus continuous review and look at a one-period newsvendor perishable inventory model. The author moves to the basic multiperiod dynamic model, and then considers the extensions of random lifetime, inclusion of a set-up cost, and multiproduct models of perishables. A chapter on continuous review models looks at one-for-one policies, models with zero lead time, optimal policies with positive lead time, and an alternative approach. Additional chapters present material on approximate order policies, inventory depletion management, and deterministic models, including the basic EOQ model with perishability and the dynamic deterministic model with perishability. Finally, chapters explore decaying inventories, queues with impatient customers, and blood bank inventory control. Anyone researching perishable inventory systems will find much to work with here. Practitioners and consultants will also now have a single well-referenced source of up-to-date information to work with.
Author: Lenos Trigeorgis
Publisher: MIT Press
ISBN: 9780262201025
Category : Business & Economics
Languages : en
Pages : 452
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Book Description
Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. In the 1970s and the 1980s, developments in the valuation of capital-investment opportunities based on options pricing revolutionized capital budgeting. Managerial flexibility to adapt and revise future decisions in order to capitalize on favorable future opportunities or to limit losses has proven vital to long-term corporate success in an uncertain and changing marketplace. In this book Lenos Trigeorgis, who has helped shape the field of real options, brings together a wealth of previously scattered knowledge and research on the new flexibility in corporate resource allocation and in the evaluation of investment alternatives brought about by the shift from static cash-flow approaches to the more dynamic paradigm of real options—an approach that incorporates decisions on whether to defer, expand, contract, abandon, switch use, or otherwise alter a capital investment. Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. Also discussed are the strategic value of new technology, project interdependence, and competitive interaction. The ability to value real options has so dramatically altered the way in which corporate resources are allocated that future textbooks on capital budgeting will bear little resemblance to those of even the recent past. Real Options is a pioneer in this area, coupling a coherent picture of how option theory is used with practical insights in into real-world applications.
Author: Jagmohan Raju
Publisher: Pearson Prentice Hall
ISBN: 0137071884
Category : Business & Economics
Languages : en
Pages : 225
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Book Description
In Smart Pricing: How Google, Priceline and Leading Businesses Use Pricing Innovation for Profitability, Wharton professors and renowned pricing experts Jagmohan Raju and Z. John Zhang draw on examples from high tech to low tech, from consumer markets to business markets, and from U.S. to abroad, to tell the stories of how innovative pricing strategies can help companies create and capture value as well as customers. They teach the pricing principles behind those innovative ideas and practices. Smart Pricing introduces many innovative approaches to pricing, as well as the research and insights that went into their creation. Filled with illustrative examples from the business world, readers will learn about restaurants where customers set the price, how Google and other high-tech firms have used pricing to remake whole industries, how executives in China successfully start and fight price wars to conquer new markets. Smart Pricing goes well beyond familiar approaches like cost-plus, buyer-based pricing, or competition-based pricing, and puts a wide variety of pricing mechanisms at your disposal. This book helps you understand them, choose them, and use them to win.
Author: Hossein Bidgoli
Publisher: John Wiley & Sons
ISBN: 047024948X
Category : Business & Economics
Languages : en
Pages : 961
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Book Description
The discipline of technology management focuses on the scientific, engineering, and management issues related to the commercial introduction of new technologies. Although more than thirty U.S. universities offer PhD programs in the subject, there has never been a single comprehensive resource dedicated to technology management. "The Handbook of Technology Management" fills that gap with coverage of all the core topics and applications in the field. Edited by the renowned Doctor Hossein Bidgoli, the three volumes here include all the basics for students, educators, and practitioners
