Pricing for a product with network effects and mixed logit demand

Nosrat, Fatemeh; Cooper, William L.; Wang, Zizhuo

doi:10.1002/nav.21943

Cited by 17 publications

(2 citation statements)

References 38 publications

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“…Nosrat et al. (2021) studied optimal pricing for a single product with multiple customer segments and the network effects under a mixture of MNL models. Our work distinguishes itself from this series of works by the following features.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In their subsequent work, Du et al (2018) solved the worst-case pricing problem for a single product under the network effects. Nosrat et al (2021) studied optimal pricing for a single product with multiple customer segments and the network effects under a mixture of MNL models. Our work distinguishes itself from this series of works by the following features.…”

Section: Production and Operations Managementmentioning

confidence: 99%

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Optimal capacity sizing of park‐and‐ride lots with information‐aware commuters

Wang,

2023

Production and Operations Management

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We study capacity sizing of park‐and‐ride lots that offer services to commuters sensitive to congestion and parking availability information. The goal is to determine parking lot capacities that maximize the total social welfare for commuters whose parking lot choices are predicted using the multinomial logit model. We formulate the problem as a nonconvex nonlinear program that involves a lower and an upper bound on each lot's capacity, and a fixed‐point constraint reflecting the effects of parking information and congestion on commuters' lot choices. We show that except for at most one lot, the optimal capacity of each lot takes one of three possible values. Based on analytical results, we develop a one‐variable search algorithm to solve the model. We learn from numerical results that the optimal capacity of a lot with a high intrinsic utility tends to be equal to the upper bound. By contrast, a lot with a low or moderate‐sized intrinsic utility tends to attain an optimal capacity on its effective lower bound. We evaluate the performance of the optimal solution under different choice scenarios of commuters who are shared with real‐time parking information. We learn that commuters are better off in an average choice scenario when both the effects of parking information and congestion are considered in the model than when either effect is ignored from the model.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Production and Operations Managementmentioning

confidence: 99%

Optimal capacity sizing of park‐and‐ride lots with information‐aware commuters

Wang,

2023

Production and Operations Management

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Pricing a product with network effects for sale to a fixed population of customers

Chen,

Cooper

2024

Naval Research Logistics

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We consider a deterministic dynamic pricing problem for a product that exhibits network effects and that is sold to a fixed heterogeneous population of customers. We begin by introducing a demand model wherein those customers are arrayed over two‐dimensional space according to a bivariate probability distribution. Each customer's location in space provides a description of that customer's intrinsic value for the product as well as the extent to which the customer is influenced by the network effect. In the pricing problem, as sales accumulate over time, the set of customers who have already purchased the product grows, while the set of customers who have not yet purchased the product shrinks. The total customer population remains fixed. Those who have not yet purchased constitute the remaining population of potential buyers of the product. As time moves forward, the mix of customers that remain as potential buyers evolves endogenously. The demand model yields a geometric interpretation of the remaining population of potential buyers, and gives rise to a dynamic program with states that are sets in two‐dimensional space. It is not practical to solve the dynamic pricing problem to optimality, so we present bounds and comparative statics results that help us identify tractable heuristics and obtain rigorous performance guarantees. In numerical experiments, we find that fixed‐price policies may perform poorly, especially when the network effect is strong or the time horizon is long. We also introduce a stochastic version of the problem that uses a spatial Poisson process to describe the customers, and we develop and analyze a heuristic approach for that formulation.

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Optimal pricing in social networks under fuzzy environment

Liu,

2024

Soft Comput

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Pricing for a product with network effects and mixed logit demand

Cited by 17 publications

References 38 publications

Optimal capacity sizing of park‐and‐ride lots with information‐aware commuters

Optimal capacity sizing of park‐and‐ride lots with information‐aware commuters

Pricing a product with network effects for sale to a fixed population of customers

Optimal pricing in social networks under fuzzy environment

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