Topic
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.
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TL;DR: In this paper, the authors analyze the dynamic pricing decision of a monopolist marketing a new product or service whose consumption value increases with the expansion of the "network" of adopters.
Abstract: This paper analyzes the dynamic pricing decision of a monopolist marketing a new product or service whose consumption value increases with the expansion of the “network” of adopters. We characterize an optimal pricing strategy which maximizes the present value of the monopolist's profits, subject to the dynamics of the demand for network access. These dynamics depend, among other factors, on the current price and consumer anticipations about future network growth. We examine the effects of changes in the growth anticipations and the discount rate on the optimal equilibrium access price and network size. It is shown that higher growth anticipations and a lower discount rate result in a lower equilibrium price and a larger network.
119 citations
TL;DR: Basic and enhanced interaction strategies between a grid and buildings are developed using the Stackelberg game based on their identified Nash equilibria and the results show that the proposed basic interaction increased net profit by 8% and reduced demand fluctuation by about 40% and relieved the negative effects caused by prediction uncertainty.
119 citations
TL;DR: In future electric grids, a reliable forecasting of load demand could help to avoid dispatch problems given by unexpected loads, and give vital information to make decisions on energy generation and purchase, especially market-based dynamic pricing strategies.
Abstract: Load Forecasting plays a critical role in the management, scheduling and dispatching operations in power systems, and it concerns the prediction of energy demand in different time spans. In future electric grids, to achieve a greater control and flexibility than in actual electric grids, a reliable forecasting of load demand could help to avoid dispatch problems given by unexpected loads, and give vital information to make decisions on energy generation and purchase, especially market-based dynamic pricing strategies. Furthermore, accurate prediction would have a significant impact on operation management, e.g. preventing overloading and allowing an efficient energy storage.
118 citations
TL;DR: In this paper, the authors introduce a new approach to pricing sovereign risk based on sovereign credit default swap (CDS) spreads, and estimate a dynamic market-based measure of sovereign risk and use it to decompose sovereign CDS spreads into expected losses from default and the market risk premia required by investors as compensation for default risk.
Abstract: This article introduces a new approach to pricing sovereign risk based on sovereign credit default swap (CDS) spreads. We estimate a dynamic market-based measure of sovereign risk and use it to decompose sovereign CDS spreads into expected losses from default and the market risk premia required by investors as compensation for default risk. Using a dynamic panel data model, we find that country-specific fundamentals primarily drive sovereign risk while global investors9 risk aversion drives time variation in the risk premia. Consistent with this, we also find that the sovereign risk premia is more highly correlated than sovereign risk itself within emerging market regions. These results help us to explain the remarkable narrowing of emerging market spreads between 2002 and 2006 and to understand the pricing mechanism and channel of contagion for emerging debt markets.
118 citations
TL;DR: A unified two-period consumer valuation learning framework is developed that accounts for both word-of-mouth WOM effects and experience-based learning, and it is found that stronger WOM effects or more periods lead to an expansion of the seeded optimality region in parallel with a decrease in the seeding ratio.
Abstract: In this paper, we explore the economics of free under perpetual licensing. In particular, we focus on two emerging software business models that involve a free component: feature-limited freemium (FLF) and uniform seeding (S). Under FLF, the firm offers the basic software version for free, while charging for premium features. Under S, the firm gives away for free the full product to a percentage of the addressable market uniformly across consumer types. We benchmark their performance against a conventional business model under which software is sold as a bundle (labeled as 'charge-for-everything' or CE) without free offers. In the context of consumer bounded rationality and information asymmetry, we develop a unified two-period consumer valuation learning framework that accounts for both word-of-mouth (WOM) effects and experience-based learning, and use it to compare and contrast the three business models. Under both constant and dynamic pricing, for moderate strength of WOM signals, we derive the equilibria for each model and identify optimality regions. In particular, S is optimal when consumers significantly underestimate the value of functionality and cross-module synergies are weak. When either cross-module synergies are stronger or initial priors are higher, the firm decides between CE and FLF. Furthermore, we identify nontrivial switching dynamics from one optimality region to another depending on the initial consumer beliefs about the value of the embedded functionality. For example, there are regions where, ceteris paribus, FLF is optimal when the prior on premium functionality is either relatively low or high, but not in between. We also demonstrate the robustness of our findings with respect to various parameterizations of cross-module synergies, strength of WOM effects, and number of periods. We find that stronger WOM effects or more periods lead to an expansion of the seeding optimality region in parallel with a decrease in the seeding ratio. Moreover, under CE and dynamic pricing, second period price may be decreasing in the initial consumer valuation beliefs when WOM effects are strong and the prior is relatively low. However, this is not the case under weak WOM effects. We also discuss regions where price skimming and penetration pricing are optimal. Our results provide key managerial insights that are useful to firms in their business model search and implementation.
117 citations