Pricing policies for selling indivisible storable goods to strategic consumers

Pricing policies for selling indivisible storable goods to strategic consumers Ann Oper Res https://doi.org/10.1007/s10479-018-2916-x ORIGINAL RESEARCH Pricing policies for selling indivisible storable goods to strategic consumers 1 2 Gerardo Berbeglia · Gautam Rayaprolu · Adrian Vetta © Springer Science+Business Media, LLC, part of Springer Nature 2018 Abstract We study the dynamic pricing problem faced by a monopolistic retailer who sells a storable product to forward-looking consumers. In this framework, the two major pric- ing policies (or mechanisms) studied in the literature are the preannounced (commitment) pricing policy and the contingent (threat or history dependent) pricing policy. We analyse and compare these pricing policies in the setting where the good can be purchased along a finite time horizon in indivisible atomic quantities. First, we show that, given linear storage costs, the retailer can compute an optimal preannounced pricing policy in polynomial time by solving a dynamic program. Moreover, under such a policy, we show that consumers do not need to store units in order to anticipate price rises. Second, under the contingent pricing policy rather than the preannounced pricing mechanism, (i) prices could be lower, (ii) retailer revenues could be higher, and (iii) consumer surplus could be higher. This result is surprising, in that these three facts are in complete http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Annals of Operations Research Springer Journals

Pricing policies for selling indivisible storable goods to strategic consumers

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Publisher
Springer US
Copyright
Copyright © 2018 by Springer Science+Business Media, LLC, part of Springer Nature
Subject
Business and Management; Operations Research/Decision Theory; Combinatorics; Theory of Computation
ISSN
0254-5330
eISSN
1572-9338
D.O.I.
10.1007/s10479-018-2916-x
Publisher site
See Article on Publisher Site

Abstract

Ann Oper Res https://doi.org/10.1007/s10479-018-2916-x ORIGINAL RESEARCH Pricing policies for selling indivisible storable goods to strategic consumers 1 2 Gerardo Berbeglia · Gautam Rayaprolu · Adrian Vetta © Springer Science+Business Media, LLC, part of Springer Nature 2018 Abstract We study the dynamic pricing problem faced by a monopolistic retailer who sells a storable product to forward-looking consumers. In this framework, the two major pric- ing policies (or mechanisms) studied in the literature are the preannounced (commitment) pricing policy and the contingent (threat or history dependent) pricing policy. We analyse and compare these pricing policies in the setting where the good can be purchased along a finite time horizon in indivisible atomic quantities. First, we show that, given linear storage costs, the retailer can compute an optimal preannounced pricing policy in polynomial time by solving a dynamic program. Moreover, under such a policy, we show that consumers do not need to store units in order to anticipate price rises. Second, under the contingent pricing policy rather than the preannounced pricing mechanism, (i) prices could be lower, (ii) retailer revenues could be higher, and (iii) consumer surplus could be higher. This result is surprising, in that these three facts are in complete

Journal

Annals of Operations ResearchSpringer Journals

Published: Jun 4, 2018

References

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