Joint Stochastic Dynamic Pricing and Advertising with Time-Dependent Demand PDF Download
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Author: Rainer Schlosser
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
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Book Description
This paper examines the sale of perishable and durable goods in a general class of time-dependent dynamic pricing and advertising models. We derive general qualitative insights in the complex interplay of optimal pricing and advertising decisions. Using a path-wise argumentation we prove structural properties of the optimal expected profits with respect to time, inventory level, price impact, advertising impact and different model parameters, such as discount rate, marginal unit costs, and the holding cost rate. Moreover, we identify sufficient conditions which imply structural properties of optimal joint pricing and advertising strategies. Our analysis also implies general results for other related models, such as pure pricing and pure advertising models.
Author: Rainer Schlosser
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
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Book Description
This paper examines the sale of perishable and durable goods in a general class of time-dependent dynamic pricing and advertising models. We derive general qualitative insights in the complex interplay of optimal pricing and advertising decisions. Using a path-wise argumentation we prove structural properties of the optimal expected profits with respect to time, inventory level, price impact, advertising impact and different model parameters, such as discount rate, marginal unit costs, and the holding cost rate. Moreover, we identify sufficient conditions which imply structural properties of optimal joint pricing and advertising strategies. Our analysis also implies general results for other related models, such as pure pricing and pure advertising models.
Author: Rainer Schlosser
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
Many stochastic dynamic sales applications are characterized by time-dependent price elasticities of demand. However, in general, such problems cannot be solved analytically. To determine smart pricing heuristics for general time-dependent dynamic pricing models, we solve a general class of deterministic dynamic pricing problems for perishable and durable goods. The continuous time model has several time-dependent parameters, e.g., discount rate, marginal unit costs, and price elasticity. We show how to derive the value function and optimal pricing policies. On the basis of the feedback solution to the deterministic model, we propose a method for constructing heuristics to be applied to general stochastic models. For the case of isoelastic demand, we analytically verify the excellent performance of this approach for both small and large inventory levels.
Author: Kurt Helmes
Publisher:
ISBN:
Category :
Languages : en
Pages : 19
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Book Description
In this paper we analyze a stochastic dynamic advertising and pricing model with isoelastic demand. The state space is discrete, time is continuous and the planning horizon is allowed to be finite or infinite. A dynamic version of the Dorfman-Steiner identity will be derived. Explicit expressions of the optimal advertising and pricing policies, of the value function and of the optimal advertising expenditures will be given. The general results will be used to analyze the case of impatient customers. Furthermore, particular time inhomogeneous models and homogeneous ones with and without discounting will be examined. We will study the social efficiency of a monopolist's optimal policies and the consequences of specific subsidies. From a buyer's perspective, our analysis reveals that waiting -- when looking at (immediate) expected prices -- is never profitable should two or more units be available. But we will also prove that the sequence of average sales prices is monotone decreasing. Moreover, the techniques applied to solve the discrete stochastic advertising and pricing problem will be used to solve a related deterministic control problem with continuous state space.
Author: Rainer Schlosser
Publisher:
ISBN:
Category :
Languages : en
Pages : 30
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Book Description
This paper analyzes a dynamic pricing and advertising model for the sale of perishable products under constant absolute risk aversion. We consider a time-dependent version of Gallego and van Ryzin's (1994) model with advertising effects, accounting for marginal unit costs. We derive closed-form expressions of the optimal risk-averse pricing and advertising policies of the value function and of the certainty equivalent. The formulas provide insight into the (complex) interplay between risk-sensitive pricing and advertising decisions. Moreover, to evaluate the optimally controlled sales process over time we propose efficient simulation techniques. These are used to analyze the characteristics of different degrees of risk aversion, particularly the concentration of the profit distribution and the impact on the expected evolution of price and advertising rates.
Author: Nita H. Shah
Publisher: Springer Nature
ISBN: 9811396981
Category : Business & Economics
Languages : en
Pages : 470
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Book Description
This book discusses inventory models for determining optimal ordering policies using various optimization techniques, genetic algorithms, and data mining concepts. It also provides sensitivity analyses for the models’ robustness. It presents a collection of mathematical models that deal with real industry scenarios. All mathematical model solutions are provided with the help of various optimization techniques to determine optimal ordering policy. The book offers a range of perspectives on the implementation of optimization techniques, inflation, trade credit financing, fuzzy systems, human error, learning in production, inspection, green supply chains, closed supply chains, reworks, game theory approaches, genetic algorithms, and data mining, as well as research on big data applications for inventory management and control. Starting from deterministic inventory models, the book moves towards advanced inventory models. The content is divided into eight major sections: inventory control and management – inventory models with trade credit financing for imperfect quality items; environmental impact on ordering policies; impact of learning on the supply chain models; EOQ models considering warehousing; optimal ordering policies with data mining and PSO techniques; supply chain models in fuzzy environments; optimal production models for multi-items and multi-retailers; and a marketing model to understand buying behaviour. Given its scope, the book offers a valuable resource for practitioners, instructors, students and researchers alike. It also offers essential insights to help retailers/managers improve business functions and make more accurate and realistic decisions.
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: Rainer Schlosser
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Book Description
We analyze stochastic dynamic multi-product pricing models for durable goods and consider a single advertising channel to promote all types of products. We include general adoption effects, unit costs as well as inventory holding costs. In case of isoelastic, exponential and linear demand, we derive solution formulas for the expected profit, the optimal feedback prices for all types of products, and the optimal advertising rate. In order to evaluate optimally controlled sales processes over time, we use efficient simulation techniques. Moreover, for the case of exponential demand, we demonstrate how to include risk aversion in the model.
Author: Ahmad Naeem Bajwa
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 123
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Book Description
This research aims to develop and propose mathematical models that can be used to facilitate cross-functional coordination between operations and marketing. We consider a dynamic problem of joint pricing, advertising, and production decisions for a profit maximizing firm that produces multiple products. We assume the firm operates in monopolistic environment, where demand for its products is a function of price and advertising expenditure. We model the problem as a mixed integer nonlinear program, incorporating capacity constraints, setup costs, and demand seasonality. We first model and solve the pricing problem without advertising. Later, we extend the model to include advertising as decision variables. The demand for each product is assumed to be continuous, differentiable, strictly decreasing in price and concave in advertising. We present a solution approach which can be used for constant pricing, as well as dynamic pricing strategies. Furthermore, the solution approach is more general and applicable for linear as well as nonlinear demand functions. Using real world data from a manufacturer, we create problem instances, for different demand scenarios at different capacities, and solve for optimal prices for each strategy. We present analytical results that provide managerial insights on how the optimal prices change for different production plans and at different capacities. We compare the firm's profitability for the two pricing strategies, and show that dynamic pricing is valuable at low capacities and when at least one of the products has peak demand in the beginning of the planning horizon. We show that the optimal allocation of advertising budget across products does not change with budget changes. Moreover, the change is minimal with changes in demand seasonality. It is optimal to increase advertising in periods of higher demand and decrease in periods of lower demand. Hence, firms can use rules of thumb and need not to frequently review the allocation. Numerical results show that the proposed algorithms have good convergence properties. Finally, as it is clear from review of academic literature; there are no decision support systems that truly integrate the production/inventory and pricing decisions - specially for multi-product problems. We believe, this work makes valuable contributions in developing solution methodologies that can be incorporated in such decision support systems.
Author: Mahya Hemmati
Publisher: CRC Press
ISBN: 1000406970
Category : Technology & Engineering
Languages : en
Pages : 248
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Book Description
In today’s competitive markets, considering the demand and the supply chain sides is crucial to keeping revenue and customer satisfaction maximized. Managing and planning demand play a vital role in the sustainability of a company. This is the first book to the discuss managerial, mathematical, and conceptual framework of influencing factors on demand along with accurate mathematical analyses to evaluate and raise revenue. The book provides an understanding of the key elements that impact buyer demand. It presents the mathematical relationship between the influencing factors and the demand functions. It discusses the methods used for inspiring demand, how to measure demand dependency on components such as price, quality, and inventory, and it helps management improve alignment between supply and demand by affecting the level and understanding of the role within supply chain management (SCM). This book is applicable for the professional as well as for academia. It can help those working in SCM, project management, production, inventory control, scheduling, engineering management, retail management, and operations management.
Author: Shah, Nita H.
Publisher: IGI Global
ISBN: 1522532331
Category : Business & Economics
Languages : en
Pages : 672
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Book Description
Stock management and control is a critical element to the success and overall financial well-being of an organization. Through the application of innovative practices and technology, businesses are now able to effectively monitor their operations and manage their inventory by evaluating sales patterns and customer preferences. The Handbook of Research on Promoting Business Process Improvement Through Inventory Control Techniques is a critical scholarly resource that examines optimization techniques, data mining concepts, and genetic algorithms to manage inventory control. Featuring coverage on a broad range of topics such as logistics and supply chain management, stochastic inventory modelling, and inventory management in healthcare, this book is geared towards academicians, practitioners, and researchers seeking various research methods to get optimal ordering policy.
