Dynamic pricing

About: Dynamic pricing is a research topic. Over the lifetime, 4144 publications have been published within this topic receiving 91390 citations. The topic is also known as: surge pricing & demand pricing.

An Economic Framework for Spectrum Allocation and Service Pricing with Competitive Wireless Service Providers

Abstract: In the future, we can expect to see more dynamic service offerings and profiles, as users move from long-term service provider agreements to more opportunistic service models. Moreover, when the radio spectrum is itself traded in a market- based scenario, wireless service providers (WSPs) will likely require new strategies to deploy services, define service profiles, and price them. Currently, there is little understanding on how such a dynamic trading system will operate so as to make the system feasible under economic terms. From an economic point of view, we analyze two main components of this overall trading system: (i) spectrum allocation to WSPs and (ii) interaction of end users with the WSPs. For this two-tier trading system, we present a winner determining sealed-bid knapsack auction mechanism that dynamically allocates spectrum to the WSPs based on their bids. We propose a dynamic pricing strategy based on game theory to capture the conflict of interest between WSPs and end users, both of whom try to maximize their respective net utilities. We show that even in such a greedy and non-cooperative behavioral game model, it is in the best interest of the WSPs to adhere to a price threshold which is a consequence of a price equilibrium in an oligopoly situation. Through simulation results, we show that the proposed auction entices the WSPs to participate in the auction, makes optimal use of the common spectrum pool, and avoids collusion among WSPs. Moreover, numerical results demonstrate how pricing can be used as an effective tool for providing incentives to the WSPs to upgrade their network resources and offer better services.

Dynamic Pricing of New Experience Goods

Abstract: We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay. We consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers.

Integrating Dynamic Pricing and Replenishment Decisions Under Supply Capacity Uncertainty

Abstract: This paper examines an integrated decision-making process regarding pricing for uncertain demand and sourcing from uncertain supply, which are often studied separately in the literature. Our analysis of the integrated system suggests that the base stock list price policy fails to achieve optimality even under deterministic demand. Instead, the optimal policy is characterized by two critical values: a reorder point and a target safety stock. Under this policy, a positive order is issued if and only if the inventory level is below the reorder point. When this happens, the optimal order and price are coordinated to achieve a constant target safety stock, which aims at hedging the demand uncertainty. We further investigate the profit improvement obtained from deploying dynamic pricing, as opposed to static pricing. Our results indicate that either supply limit or supply uncertainty may induce a significant benefit from dynamic pricing, and the compound effect of supply limit and uncertainty can be much more pronounced than the individual effects. Whether or not the supply capacity is limited has a major implication on the value of dynamic pricing. Under unlimited supply, dynamic pricing is more valuable when procurement cost is high or when demand is more sensitive to price. With limited supply, however, the capacity restriction tends to be relaxed, reducing the value of dynamic pricing.

Behavior-Based Pricing: An Analysis of the Impact of Peer-Induced Fairness

Abstract: Firms tracking consumer purchase information often use behavior-based pricing (BBP), i.e., price discriminate between consumers based on preferences revealed from purchase histories. However, behavioral research has shown that such pricing practices can lead to perceptions of unfairness when consumers are charged a higher price than other consumers for the same product. This paper studies the impact of consumers’ fairness concerns on firms’ behavior-based pricing strategy, profits, consumer surplus, and social welfare. Prior research shows that BBP often yields lower profits than profits without customer recognition or behavior-based price discrimination. By contrast, we find that firms’ profits from conducting BBP increase with consumers’ fairness concerns. When fairness concerns are sufficiently strong, practicing BBP is more profitable than without customer recognition. However, consumers’ fairness concerns decrease consumer surplus. In addition, when consumers’ fairness concerns are sufficiently stron...