Dynamic pricing with strategic customers

Gönsch, Jochen; Klein, Robert; Neugebauer, Michael; Steinhardt, Claudius

doi:10.1007/s11573-013-0663-7

Cited by 50 publications

(36 citation statements)

References 109 publications

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“…427 examination of field data, and laboratory experiments. Surveys appear in Bitran and Caldentey (2003), Elmaghraby and Keskinocak (2003), Chan et al (2004), Shen and Su (2007), and more recently Gönsch et al (2013), which focus on studies of dynamic pricing with strategic consumers. For a broader discussion of dynamic pricing and its place in the more general area of revenue management, see Talluri and van Ryzin (2004).…”

Section: Literature Reviewmentioning

confidence: 99%

Purchasing Scarce Products Under Dynamic Pricing: An Experimental Investigation

Mak

Rapoport

Gisches

et al. 2014

M&SOM

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W hereas theoretical studies on dynamic pricing typically assume that consumers are either fully strategic or fully myopic, systematic empirical investigations into how consumers behave under dynamic pricing contexts are relatively rare. Focusing on scarce products, we constructed and experimentally tested a two-stage model in which a firm sells a seasonal good under exogenous inventory constraints to a market of strategic buyers. In our experiment, subjects assigned the role of buyers made purchase decisions in response to prices set by an automated seller. We find that equilibrium predictions assuming fully strategic buyers largely accounted for aggregate behavior in the experiment, and the ex post optimal decisions for subjects were overwhelmingly consistent with equilibrium prescriptions. Moreover, subjects tended to become individually more strategic as the session progressed. However, there were also nuanced systematic patterns of deviations from equilibrium that had profit and pricing implications for the seller. First, a nonnegligible minority of subjects exhibited completely myopic buying behavior even with practice. Second, when the product was relatively more scarce, myopic buying had a stronger impact on demand at higher prices; the upshot is that the seller's season-profit-maximizing price could be considerably higher than what would be optimal with fully strategic buyers.

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Section: Literature Reviewmentioning

confidence: 99%

Purchasing Scarce Products Under Dynamic Pricing: An Experimental Investigation

Mak

Rapoport

Gisches

et al. 2014

M&SOM

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“…For comparison, the loss of CSC profit due to strategic customers at β max is

false({normalΠ}^{C *} |_{ρ = 0} - {normalΠ}^{C *} |_{ρ \to 1} {) / {normalΠ}^{C *} |}_{ρ = 0} = 7 / 27

or 26%, which is in the middle of the range reported in Gönsch et al. (). Not surprisingly, the loss from delays at β max is less for RPM:

false({normalΠ}^{R P M *} |_{ρ = 0} - {normalΠ}^{R P M *} |_{ρ \to 1} {) / {normalΠ}^{R P M *} |}_{ρ = 0} = 1 / 6

or 16.6%.…”

Section: Rpm With One Retailermentioning

confidence: 73%

Resale Price Maintenance with Strategic Customers

Бажанов

Levin

Nediak

2019

Production and Operations Management

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We consider a decentralized supply chain (DSC) under resale price maintenance (RPM) selling a limited‐lifetime product to forward‐looking customers with heterogeneous valuations. When customers do not know the inventory level, double marginalization under RPM leads to a higher profit and aggregate welfare than without RPM under a two‐part tariff contract (TT). Both RPM and TT profits are higher and aggregate welfare is lower than in a centralized supply chain (CSC). When customers know the inventory, RPM coincides with CSC. Thus, overestimation of customer awareness may lead to overcentralization of supply chains with profit loss comparable with the loss from strategic customers. The case of RPM with unknown inventory is extended to an arbitrary number of retailers with inventory‐independent and inventory‐dependent demand. In both cases, the manufacturer, by setting a higher wholesale price, mitigates the inventory‐increasing effect of competition and reaches the same profit as with a single retailer. The high viability and efficiency of RPM in using double marginalization as a strategic‐behavior‐mitigating tool may serve as another explanation of why manufacturers may prefer DSC with RPM to a vertically integrated firm.

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“…Subsequent research has developed in two directions: durable products being sold over long horizons; and seasonal products with non-replenishable inventory being sold over short horizons, as in our study. Surveys of both areas of research appear in [27][28][29][30][31][32][33].…”

Section: Literature Reviewmentioning

confidence: 99%

Dynamic Pricing Decisions and Seller-Buyer Interactions under Capacity Constraints

Mak

Rapoport

Gisches

2018

Games

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Focusing on sellers' pricing decisions and the ensuing seller-buyer interactions, we report an experiment on dynamic pricing with scarcity in the form of capacity constraints. Rational expectations equilibrium solutions are constructed and then tested experimentally with subjects assigned the roles of sellers and buyers. We investigate behavior in two between-subject conditions with high and moderate levels of capacity. Our laboratory market exhibits strategic sophistication: the price offers of sellers and the buyers' aggregate responses largely approximate equilibrium predictions. We also observe systematic deviations from equilibrium benchmarks on both sides of the market. Specifically, in our experiment the sellers are boundedly strategic: their prices often exhibit strategic adjustments to profit from buyers with limited strategic sophistication, but they are also often biased towards equilibrium pricing even when that would not be ex-post optimal.

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Dynamic pricing with strategic customers

Cited by 50 publications

References 109 publications

Purchasing Scarce Products Under Dynamic Pricing: An Experimental Investigation

Purchasing Scarce Products Under Dynamic Pricing: An Experimental Investigation

Resale Price Maintenance with Strategic Customers

Dynamic Pricing Decisions and Seller-Buyer Interactions under Capacity Constraints

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